As the three dominant DRAM suppliers (Samsung, SK Hynix, and Micron) are currently experiencing a shortage in their production capacities, the corresponding shortage situation in the DRAM market has yet to be resolved, according to TrendForce’s latest investigations. Taking advantage of the fact that the whole DRAM market has entered a period of cyclical upturn in 1Q21, DRAM suppliers have significantly raised quotes for specialty DRAM products. This extraordinary development has led to price hikes that are almost double digits for some specialty DRAM chips. Furthermore, the magnitude of the price hike especially widens for products belonging to the lower part of the density range and the more niche applications. Looking at MoM changes in contract prices of specialty DRAM products for February, DDR2 and DDR3 chips saw the largest price hikes. Prices of DDR4 chips also went up due to the influence of the rising quotes for DDR3 chips. The average contract price of DDR3 4Gb chips, which are still mainstream for specialty applications, jumped 6.8% MoM.
As for DDR3 2Gb chips that are primarily promoted by Taiwan-based suppliers, TrendForce indicates that there is not enough supply even as quotes are being offered. With this situation becoming the norm, the price range (i.e., the difference between the high and low prices) has also expanded dramatically. The average contract price of DDR3 2Gb chips rose by nearly 9% MoM in February. Samsung significantly raised quotes for DDR4 4Gb chips in response to the sharp upswing in prices of DDR3 chips. The low and average prices of DDR4 4Gb chips for specialty applications both climbed around 6% MoM. The average price of DDR4 8Gb chips went up by around 4% MoM as the price trend of this product aligns with the general price trends of mainstream PC DRAM and server DRAM products. However, it should be pointed out that the hikes in contract prices of specialty DRAM chips were mainly the result of the adjustments made to monthly contract deals and thus reflected the market situation of February. By contrast, prices held steady for quarterly lock-in deals with tier-1 clients.
While the three dominant DRAM suppliers have been slowing down their DDR3 manufacturing, Taiwanese suppliers are constantly adjusting their capacity allocation to maximize profits
With demand getting hotter in the specialty DRAM market, DDR3 products are starting to surpass DDR4 products and logic ICs in profit margin. Consequently, DRAM suppliers are also changing their strategies. Looking at South Korean suppliers, Samsung will continue shifting the wafer production capacity of Line 13 to CMOS image sensors over the long term. However, this reassignment has now been scaled down for this year due to the recent surge in specialty DRAM prices. Likewise, SK Hynix will keep the DRAM production capacity of its older fab M10 relatively constant through 2021 after reducing it in 2020. As for Micron, it has raised the yield rates of the 1Z-nm and 1-alpha processes, so the output shares of products based on these more advanced technologies will gradually expand. Since the available fab space in Taiwan is limited, Micron will relocate the 20nm and more mature processes to Fab 6 in the US. In sum, the output of DDR3 products from the three dominant suppliers will continue to shrink, but the pace of the reduction is now slower than originally expected.
Regarding Taiwan-based suppliers, Nanya has shifted some 20nm and 30nm production capacity from DDR4 products back to DDR3 products. Winbond has been focusing on Flash products in the recent years, and its DRAM production capacity will remain fairly limited until the completion of its new fab in Kaohsiung. Nevertheless, Winbond is concentrating its DRAM production efforts on low-density DDR2 and DDR3 products (i.e., 1Gb and 2Gb chips). It actually has the advantage of being able to raise prices as its market share for low-density products is fairly large. As for PSMC, it has been focusing on foundry manufacturing of logic ICs for a while. However, with prices now rising for foundry manufacturing of DDR3 products, PSMC now wants to shift some wafer production capacity back to DRAM. Going forward, the three Taiwan-based suppliers will keep adjusting their capacity allocation strategies in accordance with changes in the profit margins of different products. Nevertheless, even as suppliers are now changing their product mixes to take advantage of the latest market situation, TrendForce projects that specialty DRAM products will be in undersupply at least through 1H21. The magnitudes of price hikes for various types of specialty DRAM products will depend on suppliers’ capacity allocation strategies.
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