TrendForce：Lack of Unified Production Cut Efforts from DRAM Industry’s Big Three May Cause Oversupply Situation to Extend to 2013

The underwhelming 2H12 market performances have been leading to further downward PC shipment adjustments. While it was initially expected that PC shipment growth will amount to 4-5%, that figure has been adjusted to -2.5% during the second half of 2012, and may decline even further. The situation of the NB memory content designed for new operating systems, likewise, is not showing any signs of improvement. It is predicted that the 2012 memory content per PC will be at around 4.7GB, a mere 18% growth. In the DRAM market, which is currently facing an oversupply situation, prices have been showing a downtrend since July, with the 4GB memory module prices dropping from $21.5 USD to as low as $17 USD, close to 20% decrease. Facing the prospects of prices dropping below cash costs, more DRAM suppliers are taking the initiative to implement production cuts.   

According to DRAMeXchange, a research division of TrendForce, 1HSep. contract prices are continuing to show a downtrend, with DDR3 4GB prices dropping to 17.25 USD, a 4% decrease, and the lowest 4GB contract price being 17 USD, a 2.9% decrease from the previous figure. The 2GB contract price, on the other hand, has dropped by 4.9%, declining from the 10 USD mark down to 9.75 USD. Given how the chances of a high peak season demand appears to be unlikely, and taking into account Nanya’s announcement that it will gradually leave the standard memory market next year, DRAM modules will be offered at lower prices. With second tiered manufacturers’ inventory levels taking a toll on the DRAM market contract prices, it is likely that 2HSep. contract prices may decline to as low as 16 USD.  

According to TrendForce, even if Micron and Elpida were to combine their production capacities during 1Q13, the 2013 DRAM market supply will still likely exceed demand by about 7%. While the 2012 oversupply situation is better than during 2011, given how the overall market supply still surpasses demand by a high extent, prices are unlikely to return to a profitable level. With regards to standard DRAM memory, given PC memory capacity is unlikely to improve further, and considering how Windows 8 is not expected to immediately stimulate as big of a hardware transition as in the past, standard memory chip supply has exceeded demand by approximately 10%. On the other hand, with smartphones and tablets remaining popular within the market, and with high-end ultrabooks expected to begin using mobile memory chips, the supply-demand situation for the mobile memory market is expected to remain relatively stable; for 2013, it is predicted that mobile memory supply will only be 4% higher than demand. 

Considering how DRAM demand, as a whole, relies on smartphone and server based hardware products, the PC DRAM consumption rate has not been as strong as it was before. Even if the future DRAM market belongs to strong manufacturers such as Samsung, Micron, and SK Hynix, if the three do not form a unified effort in implementing production cuts or utilizing the right product mix, the oversupply situation will likely extend into 2013.