Declining DRAM contract price helps to stimulate the PC content growth

Declining DRAM contract price helps to stimulate the PC content growth
Aug 19th,2010------According to DRAMeXchange, research division of Trendforce, 1H’Aug. DDR3 2GB contract price has declined 4.5% to US$42 from US$44 in 2H’Jul. DDR2 contract price is also down 8.75% to US$36.5 given the dropping portion. With the conservative view toward the hot season sales in 2H’10 and retain certain level of DRAM inventory, PC-OEMs tend to lower the August contract price for the preparation of Christmas sales. DRAM vendors compromise the request since 2Gb chip will be largely introduced in second half of the year. Also, PC-OEMs re-consider to increase the DRAM content for new models. 3Q10 notebook content is averaged at 3GB and will likely grow 4.3% to 3.13GB in 4Q10 accordingly.

DRAM chip price decline along with the revising PC shipment and higher inventory level, yet it does not affect the earning performance of DRAM vendors. Samsung and Hynix retain above 40% gross margin while 35% for Elpida. PSC demonstrates billions of net income. DRAM vendors will not likely sell below the cost despite of the over-supply concern in 4Q10. According to DRAMeXchange, die size can be effectively shrunk in 50nm technology. 2Gb chip will turn to the mainstream standard in 2H’10. 2Gb cost will locate at range of US$1-US$.1.2 in terms of 40nm technology node, which is 20% and 50% lower than the cost in 50nm and 60nm respectively. Operating Margin will remain in the positive figures at the path of aggressive technology migration.

DRAM vendors are more cautious toward capital expenditure and will dedicate effort on cost in terms of technology migration instead of capacity expansion. Korean vendors show the most aggressive migration speed that Samsung has already primarily launched chips in 56nm and 46nm. Products in 35nm will be scheduled in 4Q10, which will account 5%-10% of total output. As for Elpida, output from “die-shrink” of 63nm can be paralleled to the output from 50nm and Elpida is schedule to skip 50nm process and directly launch 45nm in 3Q10.

Rexchip is estimated to fully migrate to 45nm process in 1Q11 and turn to the critical manufacturing facility of commodity DRAM for Elpida. PSC will set up 2 immersion scanners in 4Q10 and total 4 immersion scanners in 2011 will be fully supported for commodity DRAM. Nanya and Inotera will increase capacity to 50K in end of 3Q10 and 60K in 1Q11. Inotera will fully migrate to 50nm process and small exposure in 40nm. Capacity can be pulled up to status of full utilization at 130K. Increased output will introduce to the market in 1Q11.