TrendForce: SK Hynix’s Wuxi Plant Fire Accident Affects Q4 Supplies, September Contract Price Growth Approaches 15%

According to DRAMeXchange, a research division of TrendForce, the future DRAM contract prices are expected to trend upwards due to the production shortages resulting from the Wuxi plant's fire accident and the uncertainties surrounding its recovery period. The price uptrend is expected to persist in spite of the economic downturn and the market's underwhelming peak quarter performances.

In the periods following the Wuxi plant's fire incident, numerous relevant parties from within the industry have indicated that the pricing quotes are unlikely to be provided during 1H'September and that the movements of the contract prices will only become apparent following the mid-Autumn festival. The agreed mainstream 4GB prices have so far risen by as much as 14.29% to approximately $US 32, and are on average maintained at around the $US 30 mark. A few of the module supplies from the PC-OEMs could be obtained at $US 29 given the quarterly deals that had been settled in Q3. Throughout October and November, TrendForce projects the price increases will be more significant as the details concerning SK Hynix's fire accident are clarified and as the manufacturers' inventories drop more noticeably. 

Based on the average $US 30 price for the 4GB modules, the average 4Gb price is estimated to be around $US 3.44, which is 20% lower than the $US 4.1 price in the spot market. With the differences between the contract and spot prices likely to gradually become smaller, the contract module prices have a good shot of eventually approaching the US$ 35 mark.

Looking at the PC OEMs' inventory situation, even though most of their DRAM inventory has remained high during the beginning of September —with some ranging from 4 weeks to 2 months— their module inventories are noticeably getting lower. In order to avoid the potential supply restrictions resulting from the fire accident, more and more buyers are beginning to intensify their inventory replenishment efforts. The fire incident, on the whole, appears to have affected not only the prices of PC DRAM, but also those of graphics and server DRAM, both of which are likely to exhibit a 20% increase in Q4. The 2013 DRAM industry revenue is expected to rise by approximately 40% as the growth prospects of the Q4 prices become stronger. Along with the tightened supply situation, all of the aforementioned developments are expected to contribute to months of further price increases and allow relevant manufacturers to benefit, according to TrendForce’s assistant vice president, Avril Wu.