DRAMeXchange: 2HDec. DDR3 Contract Price Stays Flat, 2GB Module Price at US$9 Mark

According to DRAMeXchange, a research division of TrendForce, while the market has entered the traditionally weak PC shipment season, compared with 1HDec., 2HDec. contract price showed a flat price trend. DDR3 4GB and DDR3 2GB ASP was US$16.5 and US$9.25, respectively. It is the end of the year, and the long and slow contract price decline that has been taking place since 2H11 is finally showing signs of stabilizing. Average 2Gb chip price stayed at the US$0.88 level. From the market perspective, although there has been no concrete evidence showing that demand will recover significantly in 1Q12, the decrease in shipment volume caused by several DRAM makers’ previous capacity cuts will undoubtedly benefit demand recovery; some PC OEMs have increased their DRAM purchase volume in order to avoid possible supply insufficiency in the near future. As Chinese New Year is around the corner, January transaction volume is expected to be affected slightly by the decrease in the number of work days. Luckily, the effects of the prior capacity cuts will gradually be seen, and as concerns of the HDD supply shortage slowly dissipate as well, it is likely that DRAM contract price will see a stable price trend in the near future.
 
2011 in Review: Major Events the DRAM Industry       
 
2011 was a year full of uncertainties for the DRAM industry – not only did several natural disasters affect DRAM supply and demand, but DRAM consumption volume was significantly impacted by a change in the ecosystem: the effect of increasingly popular tablets on the PC industry. Furthermore, consumers are increasingly seeking thinner, lighter hardware. All of these factors contributed to a significant decrease in DRAM demand, resulting in a severe oversupply situation in the second half of the year. The following is TrendForce’s review of the major events affecting the DRAM industry in 2011:
 
1. 2011 DRAM contract price fell by 58%, spot price decreased by 70%
DRAM 2Gb contract price fell by 58% in 2011, from a high of US$2.13 in May to the current US$0.88, while spot price experienced an even larger decrease, falling by 70% from US$2.32 to US$0.7 – a figure nearing the lowest price reached during the global financial crisis of 2008.
 
2. Many DRAM makers cut capacity in 2H11
As DRAM chip price plummeted, even to the point of breaking cash cost, many DRAM makers announced capacity cuts in the second half of the year. Capacity was adjusted downward from 1300K starts per month in the beginning of 2011 to around 1030K, a decrease of approximately 21%. Taiwanese manufacturers were most severely affected, with a 44% capacity decrease.
 
3. Next-generation technology migration increasingly difficult, gap between DRAM makers widens
As technology migration requires extensive R&D funding, the gap between DRAM makers is widening as technology migration becomes more complex; Samsung is gradually entering the 20nm node class, while Hynix and Elpida advanced to the 30nm node class in 2H11. Taiwanese manufacturers, however, remain on 40nm and 50nm processes. Lagging so far behind, Taiwanese makers are highly concerned about the future direction of their businesses.
 
4. March 11 earthquake in Japan hit DRAM industry upstream supply chain
The impact of the earthquake that hit northeastern Japan on silicon wafer supply, as well as the resulting series of planned electricity blackouts affected the DRAM industry on a global scale. In particular, Shin-Etsu’s Shirakawa-Fukushima plant and SUMCO’s Yamagata-Yonezawa plant were the most severely affected, causing great concern with regard to silicon wafer production. However, supply shortage concerns quickly vanished as silicon wafer makers resumed operations. As a result, after May DRAM price remained on a downtrend for the rest of the year.
 
5. Taiwanese DRAM makers gradually exit commodity DRAM market, turning to dedicated foundry and non-commodity DRAM business
As the commodity DRAM market is looking grim, Taiwanese DRAM makers are backing out one by one. ProMOS has made significant production cuts due to financial difficulties and Powerchip has transitioned to foundry and non-commodity DRAM business, while Nanya and Inotera have reduced wafer start volume to make it through the harsh winter.
 
6. Thailand flood disaster impacted the HDD supply chain, in turn affecting PC shipments and DRAM price
The Thailand flood disaster in 4Q negatively affected HDD shipments – maker Western Digital was most severely impacted. While Seagate and Hitachi were not directly crippled by the flooding, flood-related issues such as local traffic delays resulted in shipment difficulties, causing a global shortage of 10-20%. Luckily, as HDD manufacturers reacted immediately, the recovery process has gone relatively smoothly. TrendForce estimates that the HDD industry will recover completely, with supply returning to normal levels in February 2012.