TrendForce：Strong Spot Price Momentum Spurs a Near 20% Growth in 1H’March 4GB Module Contract Price

According to DRAMeXchange, a research division of TrendForce, given the replenishment demand for China’s white-box tablet PCs (MID, Mobile Internet Device), from the period of March 1st to March 12th, the 2Gb spot prices climbed from $US 1.05 to $US 1.75, a 66% increase and the strongest growth observed in recent years. With the supply chain in China’s white-box tablet industry maturing, more and more noticeable improvements have been spotted in the tablets’ hardware specs. Because of these enhancements, and because of the low price advantage, shipments have begun to increase noticeably this year. Under cost-based considerations, manufacturers of white box MID products are known to use PC DRAM rather than the mobile DRAM found in major branded tablet PCs. The increased demand for these MID products has led to a renewed interest in PC DRAM, which is a major driving force behind the recent price uptrend.

Affected by the spot price movements, contract prices also surged and are far above market expectations. The ASP of mainstream 4GB modules, for example, grew by 16.46% and ended at $US 23. For the 2GB products, given the unstable supply resulting from the technology migration processes, average prices arrived at $US 13.75, an increase of over 20%. With regard to the situation with the PC OEMs, even though PC shipments aren’t expected to improve in Q2, in order to replenish inventory and prepare for the upcoming peak quarters, various OEMs have shown no intention of reducing their purchase orders and seem unfazed by the increasing costs. In the short term, there is a possibility that DRAM prices will gradually return to their normal levels. Using the 2Xnm costs as the basis of calculation, DRAM manufacturers have a legitimate shot at turning PC DRAM into a profitable item.

Tightening of PC DRAM Production and Rise of Low-Cost Chinese Tablets to Bolster 2013 Contract Price Momentum

DRAM contract prices soared by nearly 20% in 1H’March, the largest growth observed since November 2012. Whereas the 4GB module ASP climbed from $US 15.25 to $US 23, a near 50% increase within the span of three months, the average prices of the 2GB modules jumped by almost 60% as the production for the 2Gb chips gradually phases out. Even with the sluggish PC shipments and the constant downward revisions, DRAM prices are in a consistent uptrend, and market supply appears to be constrained in various situations. Observing from the market perspective, these trends can be attributed to a number of factors. With the first tiered DRAM manufacturers actively transitioning into mobile and server DRAM, the proportion of PC DRAM production ended at only 35% this year, which is approximately 10% less than the previous year’s 45%. Also noteworthy is the popularity of smartphones and tablet PCs, which appear to be intensifying the overall demand for mobile DRAM. In addition to the fact that many first tiered manufacturers are targeting the 3GB memory chips, Apple is said to be contemplating about breaking away from its one-smartphone-per-year routine. The increased global presence of China’s smartphone brands, further, has caused total mobile DRAM supply to increase from 20% in 2012 to approximately 30% this year. The growth rate is currently the fastest that is observed among various memory markets.

In addition to the abovementioned trends, one particular development that is also worthy of noting is the rising demand for China’s low-cost tablets. While various first-tiered tablet PC manufacturers tend to stress the importance of hardware performance and power-efficient mobile memory chips, for the Chinese low-cost tablets, the major point of attraction is affordability. The use of PC DRAM, as such, has been heavily favored in order to control and reduce manufacturing costs. This year, it is predicted that the shipment numbers will grow from 50M to over 100M, and that the price momentum will become highly noticeable within the spot market. The prices for the 2Gb chips have already moved from $US 1.05 at the beginning of the year to around $US 1.75, which represents an increase of 66%. The price increase has renewed the interest in the PC DRAM market, and along with the tightened supply of PC DRAM, is helping to boost contract prices to record levels. Given the consistent upward momentum of the contract prices (which is already allowing various DRAM manufacturers to profit), TrendForce predicts that there’s a chance for the prices to reach either $US 27 or $US 28. The global DRAM market’s eventual transition into an oligopoly is likely to give rise to a profitable era within the DRAM industry.