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2021/11/04
Despite the forecasted 186% YoY growth in total DRAM bit supply next year, the global DRAM market is still expected to shift from a shortage situation to an oversupply, according to TrendForce’s latest investigations This shift can primarily be attributed to the fact that, not only are most buyers now carrying a relatively high level of DRAM inventory, but DRAM bit demand is also expected to increase by only 171% YoY in 2022 On the price front, the oversupply situation will result in a drop in DRAM ASP in 2022 but not a major decline in annual DRAM revenue, thanks to the oligopolistic nature of the DRAM industry Annual DRAM revenue for 2022 is expected to reach US$9154 billion, which represents a slight YoY increase of 03%
Based on an analysis of DRAM sufficiency ratio (which refers to the surplus of supply in comparison with demand) for each quarter in 2022, TrendForce forecasts a 15% YoY decrease in DRAM ASP for 2022, with prices undergoing the more noticeable declines during the first half of the year Heading into 2H22, however, owing to the rise in DDR5 penetration rate, as well as the arrival of peak seasonal demand, the decline in DRAM ASP will likely narrow TrendForce does not rule out the possibility that DRAM ASP may even hold flat or undergo an increase in 2H22
Annual NAND Flash revenue is expected to experience yet another increase next year by 74% YoY while numerous suppliers compete in higher-layer NAND Flash market segment
Turning to the NAND Flash market, TrendForce forecasts a 318% increase in total bit supply for 2022 and a 308% increase in total bit demand Hence, NAND Flash ASP will likely experience a downtrend next year as a result of the oversupply situation In addition, due to the perfect competition in the NAND Flash market, the decline in NAND Flash ASP next year will be more noticeable than the decline in DRAM ASP However, NAND Flash suppliers continues to make progress in the stacking of NAND Flash layers, so the growth in NAND Flash bit supply next year will therefore remain above 30% TrendForce thus expects NAND Flash revenue to have more room for growth and reach US$7419 billion in 2022, a 74% YoY increase
TrendForce’s forecast based on an analysis of NAND Flash sufficiency ratios for each quarter in 2022 similarly points to an 180% YoY decline in NAND Flash ASP next year Much like DRAM, NAND Flash prices will undergo the more noticeable declines during 1H22 Arrival of peak seasonal demand in 2H22 will potentially result in a narrowing of price drops and a potential for quarterly prices to hold flat
On the whole, the revenue performance of the DRAM industry and that of the NAND Flash industry over the years show that the annual total DRAM revenue is growing at more stable pace Again, this has to do with the oligopolistic structure of the DRAM market Since the DRAM market has a different competitive landscape, the fluctuations in the overall DRAM ASP have been relatively modest over the long run However, the development of the DRAM manufacturing technology is approaching a physical bottleneck as process nodes shrink below the 20nm level This means that the bit growth derived from the deployment of a more advanced process is becoming more and more limited over the years On the other hand, not only are NAND Flash suppliers relatively more unstable in their capacity expansion plans compared to the DRAM industry, but further improvements in NAND Flash layer-stacking technology also remains feasible Hence, the fluctuations in the overall NAND Flash ASP have been relatively more volatile over the long run On account of these factors, the DRAM industry generally has smaller YoY revenue growth rates compared with the NAND Flash industry, although the DRAM industry continues to surpass the NAND Flash industry in terms of profitability
Profitability of suppliers may be constrained if total revenue fails to keep pace with continuously rising CAPEX
Regarding the CAPEX (capital expenditures) of DRAM suppliers, there has been a gradual increase in these suppliers’ CAPEX to sales ratio in recent years, for two reasons First, the development of the DRAM manufacturing technology is approaching a physical bottleneck Die improvements have become more and more limited after process nodes have shrunk below the 20nm level Micron’s 1alpha nm process can offer an almost 30% increase in bits per wafer, but the 1Xnm-to-1Ynm migrations and the subsequent 1Ynm-to-1Znm migrations that the major suppliers have undertaken in the recent period have yielded increases of no more than 15% in bits per wafer Looking at future technological developments, Samsung and SK hynix have already integrated EUV lithography into their most advanced process technologies However, orders for EUV lithography tools have a much longer lead time, and the costs of these tools are also high Hence, the three dominant suppliers have allocated a large chunk of capital expenditure in advance to place orders for EUV lithography tools ahead of time
Secondly, the oligopolistic structure of the DRAM market has also helped establish a regime where there is a very low chance of a supplier’s ASP dipping under its fully-loaded cost despite the recurrence of the cyclical price downturn Moreover, DRAM suppliers have accumulated a substantial amount of profit from their products In view of the difficulties in die shrinking, suppliers ranging from the three dominant suppliers to others with less market share (such as Nanya Tech and Winbond) have developed tangible plans for capacity expansions These plans have, in turn, become the other main driver behind the ongoing increase in the CAPEX to sales ratio
The CAPEX to sales ratio of NAND Flash suppliers have likewise risen substantially following the transition to 3D NAND technology in 2017 Notably, the average CAPEX to sales ratio fell within the 25-30% range prior to 2017, but it has since climbed to nearly 40% as of now This growth can primarily be attributed to the fact that, as the number of 3D NAND layers increases, there is a corresponding increase in the lead times of NAND Flash products and in the degree of precision as well as difficulty involved in the etching process While the mainstream layer count of NAND Flash products approaches 1YY layers, suppliers are currently planning to move forward with the development of products with 2XX layers, which place an ever-increasing demand on etch depth The CAPEX of NAND Flash suppliers will continue to grow alongside increases in layer count and revenue
TrendForce indicates that NAND Flash layer-stacking technology will continue to progress, meaning suppliers will continue to pursue the stacking of additional layers as a way to lower their manufacturing cost per GB As such, the NAND Flash industry’s CAPEX will have additional potential for growth going forward, with a CAPEX to sales ratio of close to 40% or above It should be noted, however, that if total NAND Flash revenue fails to keep pace with the growth in CAPEX in the next few years, NAND Flash suppliers’ CAPEX to sales ratio may potentially undergo an excessive increase, thereby constraining the profitability of suppliers
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2021/10/12
DRAM contract prices are likely to exit a bullish period that lasted three quarters and be on the downswing in 4Q21 at a QoQ decline of 3-8%, according to TrendForce’s latest investigations This decline can be attributed to not only the declining procurement activities of DRAM buyers going forward, but also the drop in DRAM spot prices ahead of contract prices While the buying and selling sides attempt to gain the advantage in future transactions, the DRAM market’s movement in 2022 will primarily be determined by suppliers’ capacity expansion strategies in conjunction with potential growths in demand The capacity expansion plans of the three largest DRAM suppliers (Samsung, SK hynix, and Micron) for 2022 are expected to remain conservative, resulting in a 179% growth in total DRAM bit supply next year On the demand side, inventory levels at the moment are relatively high Hence, DRAM bit demand is expected to grow by 163% next year and lag behind bit supply growth TrendForce therefore forecasts a shift in the DRAM market next year from shortage to surplus
Total DRAM bit supply is projected to grow by 179% in 2022 in light of DRAM suppliers’ low inventory levels and resurging demand in the server market
As buyers expanded their DRAM procurement in 1H21 in response to supply chain disruptions, DRAM suppliers were able to register better-than-expected shipment performances and reduce their inventory levels considerably These suppliers are now bullish on the growth of DRAM bit demand generated by the resurging server market In particular, while Samsung and SK hynix have marginally increased their wafer input for DRAM products, DRAM suppliers’ process technologies are continuing to migrate towards the 1Z nm and 1alpha nm nodes TrendForce therefore expects total DRAM bit supply to increase by 179% YoY in 2022
Most of Samsung’s wafer input growth takes place in the P2L fab, which houses relatively large physical spaces As the prevailing market leader, Samsung will likely continue to increase wafer input for DRAM products going forward The company’s DRAM bit supply growth for 2022 is expected to reach 196%, the highest out of the three dominant suppliers, despite the relatively modest growth in Samsung’s current wafer input, most of which comes from advanced process technologies It should also be pointed out that Samsung’s newest fab P3L is expected to be fully built by mid-2022 P3L will likely contribute to DRAM production by a limited amount next year but continue to provide further growth for Samsung’s DRAM supply after 2023
Given the bear market for DDR3 memory, SK hynix will likely speed up the reallocation of wafer capacity from DRAM to logic IC products at its old M10 fab next year After kicking off DRAM production at its newest M16 fab this year, SK hynix will see its total production capacity for DRAM chips continue expanding in 2022, although the company will also adjust its DRAM output according to the state of the market SK hynix is currently focused on raising the yield rates of its 1Y nm and 1Z nm process technologies, which will contribute to the forecasted 177% increase in SK hynix’s total DRAM bit supply next year
The latest expansions at Micron’s A3 fab are primarily undertaken as a safeguard against possible wafer losses during the fab’s upcoming transition to next-gen process technologies Hence, Micron’s total production capacity will unlikely undergo drastic changes for the 2021-2022 period, and growths in its DRAM bit output will be mostly derived from the increased yield of the 1Z nm and the latest 1alpha nm process technologies In addition, DRAM products manufactured with Micron’s 1alpha nm process technology have been widely adopted by clients, and Micron has been making the fastest progress in terms of process technology migration among the three largest DRAM suppliers The company is expected to increase its DRAM bit supply by 163% next year
Regarding Taiwanese suppliers, Nanya Tech is expected to finalize the construction of its new fab in 2024, while Winbond’s new fab is expected to kick off only pilot runs in 2H22 Taiwanese suppliers are therefore expected to make very limited contributions to the increase in total DRAM bit supply in 2022
DRAM bit demand is expected to increase by merely 163% in 2022, as the bear market for various products results in a high base period in 2021
The smartphone, server, and notebook computer segments comprise the three largest sources of DRAM consumption All three product categories have been seeing tremendous growth in 2021, thereby resulting in a high base period for comparison against next year’s figures, meaning that significant YoY growths in these products’ production and shipment, and subsequently their DRAM consumption, for 2022 are unlikely to take place Furthermore, the ongoing shortage of components has continued to affect various industries and constrain device assembly, leading to a decline in demand for DRAM, since OEMs/ODMs are carrying a relatively high level of DRAM inventory For 2022, DRAM bit demand is expected to increase by only 163% and lag behind DRAM bit supply
Regarding smartphones, while the shortage of key components such as chipsets and driver ICs remains unresolved, total smartphone shipment for 1Q22, which is already a period of cyclical downturn, will fall below expectations Although the upcoming release of new models is expected to bring about quarterly increases in smartphone production, TrendForce’s current forecast indicates an annual production volume of about 14 billion units for 2022, a modest 35% YoY growth This forecasted figure will likely be subject to additional declines if the shortage of semiconductor components extends further As such, the main growth driver of mobile DRAM demand in 2022 is expected to be the increase in “content per box” (which refers to the total DRAM contained within each individual handset) For 2022, mobile DRAM will account for approximately 40% of total DRAM bit consumption; there will likely be a 15% increase in mobile DRAM bit demand as well This increase represents a relatively sluggish performance, as mobile DRAM demand generally increased by more than 20% YoY in previous years
The server industry likewise faced supply chain-related issues, including disruptions in server assembly operations based in Southeast Asia, as well as shortages of PMICs and passive components With these issues projected to persist through 2022, total server shipment is expected to increase by 43% in 2022, primarily thanks to CSPs’ data center expansions On the other hand, the rise in Intel Ice Lake CPUs’ market share this year has led DRAM suppliers to manufacture more high-density dies (16Gb mono die) due to the server market’s surging demand for 64GB modules Once Intel’s next-gen Xeon server CPUs, Sapphire Rapids, enter the market next year, the penetration rate of 64GB server DRAM modules is expected to surpass 60% Hence, server DRAM bit demand is projected to increase by 20% in 2022, the highest among all DRAM product categories
Annual shipment of notebook computers for 2022 is projected to reach 222 million units, a nearly 7% YoY decrease, owing to increased vaccination rates in Europe and North America However, as WFH and distance education become the norm, annual notebook shipment will undergo some growth in the medium to long term, without falling back down to pre-pandemic levels Although Chromebooks remained the fastest-growing product category among all notebooks in 1H21, demand for Chromebooks has been steadily declining in 2H21 due to the increased Chromebook inventory carried by distribution channels in response to high demand for educational notebooks in 1H21 Instead, demand has shifted to commercial notebooks, which are equipped with more DRAM capacity, and this shift will persist through 2022 Total PC DRAM bit demand is expected to increase by more than 15% next year
DRAM revenue for 2022 will likely be mostly flat as bit shipment growth offsets decline in quotes
On the whole, DRAM suppliers have performed exceptionally well this year in terms of bit shipments thanks to OEMs’ energetic stock-up activities The annual total revenue of the DRAM industry is also projected to surpass US$90 billion in 2021 because of the price uptrend and the growth in bit shipments However, the DRAM market will begin to see prices falling in 4Q21 and a sharpening downtrend in 1H22 The overall ASP of DRAM products for the whole 2022 is projected to register a YoY drop of 15-20% On the other hand, the YoY growth rates of DRAM suppliers’ bit shipments will also be within a similar range for next year This means that the bit shipment growth will mostly offset the price decline, thereby keeping the total DRAM revenue for 2022 at a similar level to this year There are still uncertainties as to the movements of DRAM prices during 2H22 If prices manage to rally, then the annual total DRAM revenue may again reach a new high
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2021/09/22
Following the peak period of production in 3Q21, the supply of DRAM will likely begin to outpace demand in 4Q21, according to TrendForce’s latest investigations (the surplus of DRAM supply is henceforth referred to as “sufficiency ratio”, expressed as a percentage) In addition, while DRAM suppliers are generally carrying a healthy level of inventory, most of their clients in the end-product markets are carrying a higher level of DRAM inventory than what is considered healthy, meaning these clients will be less willing to procure additional DRAM going forward TrendForce therefore forecasts a downward trajectory for DRAM ASP in 4Q21 More specifically, DRAM products that are currently in oversupply may experience price drops of more than 5% QoQ, and the overall DRAM ASP will likely decline by about 3-8% QoQ in 4Q21
PC DRAM prices are expected to decline by 5-10% QoQ as market demand for notebook computers weakens
Although WFH and distance learning applications previously generated high demand for notebook computers, increasingly widespread vaccinations in Europe and North America have now weakened this demand, particularly for Chromebooks As a result, global production of notebooks is expected to decline in 4Q21, in turn propelling the sufficiency ratio of PC DRAM to 138%, which indicates that PC DRAM will no longer be in short supply in 4Q21 However, PC DRAM accounts for a relatively low share of DRAM manufacturers’ DRAM supply bits, since these suppliers have allocated more production capacities to server DRAM, which is in relatively high demand Hence, there will unlikely be a severe surplus of PC DRAM in 4Q21 It should also be pointed out that, on average, the current spot prices of PC DRAM modules are far lower than their contract prices for 3Q21 TrendForce therefore expects an imminent 5-10% QoQ decline in PC DRAM contract prices for 4Q21, with potential for declines that are even greater than 10% for certain transactions, as PC OEMs anticipate further price drops in PC DRAM prices in the future
Server DRAM prices are expected to decline for the first time this year, by 0-5% QoQ due to high client-side inventory
CSPs in North America and China currently carry more than eight weeks’ worth of server DRAM inventory, with some carrying more than 10 weeks’ worth of inventory, as they procured massive amounts of server DRAM in the previous two quarters to avoid shipment issues with whole server units caused by component shortages In view of this aggressive procurement effort, the overall demand for server DRAM has gradually slowed, although certain Tier 2 data centers are still procuring server DRAM to make up for previous gaps As server DRAM buyers continue to gravitate towards destocking their server DRAM inventory in 4Q21, demand will likely fall short of the previous quarters Furthermore, due to long lead times for certain key components, shipment of whole servers is also expected to undergo quarterly declines On the supply side, the three major DRAM suppliers (Samsung, SK hynix, and Micron) reallocated some of their production capacity for mobile DRAM to server DRAM in early 2Q21, and this reallocated capacity is expected to gradually begin outputting server DRAM in 4Q21 Given the slowdown in server DRAM demand, contract negotiations for server DRAM procurement in 3Q21 lasted until early August Although server DRAM contract prices underwent a 5-10% QoQ increase in 3Q21 due to suppliers’ best attempts during contract negotiations, further price hikes going forward are unlikely TrendForce expects server DRAM prices to undergo a decline for the first time this year in 4Q21 with a QoQ drop of 0-5%
Mobile DRAM prices are expected to remain relative unchanged from 3Q21 levels despite a possible price drop ahead of time at the end of the year
In light of fluctuations in the COVID-19 pandemic, the global demand for smartphones and the supply of smartphone components are both still at the risk of experiencing declines In addition, after smartphone brands revised down their production targets at the end of 2Q21, brands and distributors alike have been facing the pressure of high smartphone inventory levels In response to factors such as pandemic-related uncertainties and declines in mobile DRAM prices for 2022, smartphone brands will slow down their mobile DRAM procurement and prioritize inventory reduction instead Hence, bit demand for mobile DRAM will decline even further in 4Q21 On the whole, given the uncertain state of the pandemic in the coming winter, smartphone brands will adopt a more conservative attitude towards both smartphone production and component procurement in 4Q21 As a result, even if DRAM suppliers are willing to lower mobile DRAM prices, such an effort will only result in limited sales growths In addition, mobile DRAM still lags behind other DRAM product categories in terms of profitability, meaning a drop in mobile DRAM prices is unlikely Taking these factors into account, TrendForce expects prices of discrete DRAM, eMCP, and uMCP to mostly hold flat in 4Q21 compared with 3Q21
It should be noted that, by the end of the year, DRAM suppliers may potentially start supplying mobile DRAM at 1Q22 prices ahead of time, primarily for two reasons: First, DRAM suppliers will be faced with revenue performance pressures at the end of the year; second, smartphones and DRAM suppliers will enter into new LTAs (long term agreements) for 2022 These factors are expected to impact mobile DRAM ASP for 4Q21 and bring about a price drop ahead of time
Graphics DRAM contract prices are expected to decline by 0-5% QoQ due to excess supply
Market demand for discrete graphics cards and notebook graphics cards still remains due to the stable market for commercial notebooks and the resurging cryptocurrency mining market, which saw cryptocurrency prices rebounding from rock bottom levels within the past two months However, severe issues with the availability of components in the graphics card supply chain currently present the most significant bottleneck in graphics card production In particular, components such as driver IC, PMIC, and other peripheral components are all in shortage, while graphics DRAM is in relative oversupply compared to these other components Graphics card manufacturers are therefore revising down their graphics DRAM procurement Consequently, even though DRAM suppliers have not significantly increased their graphics DRAM production, demand from the purchasing end will remain sluggish until the shortage of other components is resolved Demand for graphics DRAM will unlikely see a resurgence before the end of 2021 On the supply side, the three major DRAM suppliers are primarily focused on GDDR6 for their current graphics DRAM production As well, graphics card demand from the cryptocurrency mining market is generally aimed at newer graphics cards that feature GDDR6 memory Accordingly, both production and sales of GDDR5 memory are relatively weak, and this bearish trend is especially reflected in spot prices As spot prices are the first to enter a downturn, and the aforementioned market conditions lead to sluggish procurement activities, graphics DRAM prices are in turn expected to plummet from previous levels in 4Q21, although this decline is projected at a minor 0-5% QoQ owing to DRAM suppliers’ efforts to keep prices constant
QoQ decline of DDR4 Consumer DRAM prices is expected to be among the highest drops, at 5-10% as procurement activities decelerate
Gradual easing of lockdowns in Europe and North America has led to a decline in consumer spending on home entertainment applications This, along with the severe shortage in electronic components, has adversely affected the demand for consumer electronics, such as TVs, STBs (set-top boxes), and networking devices, as well as industrial-use products, thereby also reducing the procurement demand for consumer DRAM On the other hand, while DRAM suppliers were in the process of transitioning from DDR3 manufacturing to other products, the massive price hike of DDR3 products in 1H21 led DRAM suppliers to slow this transition Even so, certain market conditions are now placing downward pressure on DDR3 prices, so next year the three major suppliers may potentially speed up the transition of mature DDR3 manufacturing to other products, such as CMOS image sensors or other logic ICs, instead As server and PC manufacturers’ DRAM inventory level rises, contract prices of those DRAM products will likely decline in 4Q21 Thus, given that the movement of DDR4 consumer DRAM prices is highly correlated with PC DRAM and server DRAM and has been trending relatively high, DDR4 consumer DRAM prices are expected to decline by 5-10% QoQ in 4Q21 Likewise, although the supply of DDR3 consumer DRAM has been gradually decreasing, DDR3 consumer DRAM prices will also undergo an overall decline, particularly for 4Gb chips DDR3 consumer DRAM prices are expected to decline by 3-8% QoQ in 4Q21
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2021/08/23
After DRAM prices made a rebound into an upward trajectory in 1Q21, buyers expanded their DRAM procurement activities in 2Q21 as they anticipated a further price hike and insufficient supply going forward, according to TrendForce’s latest investigations Not only was demand robust from clients in the notebook segment, which benefitted from ongoing WFH and distance learning applications, but CSPs also sought to gradually replenish their DRAM inventories Furthermore, demand for products that are relatively niche, including graphics DRAM and consumer DRAM, remained strong Hence, DRAM suppliers experienced better-than-expected QoQ increases in their DRAM shipment for 2Q21 At the same time, DRAM quotes grew by a greater magnitude compared to the first quarter as well With both shipment and quotes undergoing growths in tandem, DRAM suppliers registered remarkable growths in their revenues in 2Q21 Total DRAM revenue for 2Q21 reached US$241 billion, a 26% QoQ increase
However, heading into 3Q21, the issue of mismatched component availability began surfacing in the upstream supply chain and bottlenecking the assembly of electronic devices Some OEMs/ODMs (especially notebook manufacturers) have therefore scaled down their DRAM procurement due to their relatively high level of DRAM inventory in comparison with other components As a result, although most DRAM suppliers remain bullish on the market’s future, the growth in demand from certain product segments is likely to slow down, since DRAM buyers still carry ample inventory In light of suppliers’ insistence on raising quotes, TrendForce expects the overall ASP of DRAM products for 3Q21 to undergo a QoQ increase, albeit at a narrower 3-8% now compared to 2Q21
DRAM suppliers significantly improved their earnings performances in 2Q21 due to massive price hikes and increased shipment of products manufactured with advanced process technologies
The three dominant suppliers (Samsung, SK hynix, and Micron) of DRAM products put up similar revenue performances for 2Q21 as they saw an increase in both ASP and shipment, with the latter surpassing the suppliers’ expectations On the demand side, buyers showed an increased willingness to expand DRAM procurement because they anticipated that prices will rise even further In addition, frequent shortages of various semiconductor components this year drove buyers to stock up on DRAM ahead of time so as to avoid potential manufacturing bottlenecks due to low DRAM inventory Hence, each of the three suppliers increased its revenue by more than 20% QoQ in 2Q21 Samsung in particular registered the most remarkable growth, at a 302% QoQ increase For 3Q21, these suppliers will not only continue to hike up quotes, but also increase their quarterly shipments by a similar magnitude TrendForce thus expects their market shares to remain relatively unchanged from the previous quarter
DRAM suppliers likewise experienced considerable growths in terms of profitability for 2Q21 thanks to the massive increase in DRAM quotes, along with the fact that DRAM products manufactured with advanced process technologies occupied a growing share of the suppliers’ DRAM bit shipment For instance, while Samsung kicked off mass production with the 1Znm process in 1Q21 at a relatively low yield rate (since the technology was still in its infancy at the time), the company was able to considerably ramp up production in 2Q21, thereby raising its operating profit margin from 34% in 1Q21 to a staggering 46% in 2Q21 SK hynix similarly raised its operating profit margin to 38% in 2Q21 by improving the yield rate of its advanced process technology Micron, on the other hand, increased its DRAM quotes by a similar magnitude compared to its Korean competitors in 2Q21 (Micron counts the March-May period as its fiscal quarter) and saw a jump in its operating profit margin from 26% in 1Q21 to 37% in 2Q21 Assuming that prices and shipment continue their upward trajectory in 3Q21, TrendForce is bullish on DRAM suppliers’ profitability for the quarter as well and expects market leader Samsung to reach 50% in operating profit margin for the first time in nearly three years
Taiwanese suppliers delivered similar revenue growths to the three dominant suppliers’ in 2Q21 thanks to persistent market demand for specialty DRAM
Taiwanese DRAM suppliers posted a massive increase in their revenues for 2Q21 owing to persistently high specialty DRAM quotes and high demand from clients More specifically, Nanya Tech’s revenue grew by about 28% QoQ for 2Q21, and its operating profit margin increased from 171% in 1Q21 to 312% in 2Q21 These growths can primarily be attributed to a 30% increase in the company’s specialty DRAM quotes, and Nanya Tech has expressed that it expects further earnings growth in 3Q21 Winbond, on the other hand, saw strong demand from its clients and raised its DRAM quotes by a greater magnitude than its NAND Flash quotes Winbond’s revenue from its DRAM business not only rose by 39% QoQ in 2Q21, but also accounted for an increasing share of its total revenue, at 46%
It should be pointed out that the two aforementioned Taiwanese suppliers are still currently facing the issue of insufficient production capacities, and their existing fabs do not have the physical space to house additional manufacturing equipment Hence, before these suppliers finish constructing new fabs, they must rely on raising quotes in order to grow their DRAM businesses in the short run Nanya Tech’s new fab that is currently under construction will not be able to contribute to the company’s production capacity until construction concludes in 2024 In the short run, Nanya is able to marginally increase its bit output only through migrating to advanced process technologies at the 1A/1Bnm nodes Similarly, Winbond will not be able to resolve its issue of insufficient production capacity until its fab located in Luzhu, Kaohsiung, kicks off mass production in 2H22 As for PSMC, its revenue from sales of PC DRAM products manufactured in-house increased by about 7% QoQ in 2Q21 However, PSMC’s total revenue from both sales of in-house DRAM and its DRAM foundry business increased by 19% QoQ in 2Q21 Much like its Taiwanese competitors, PSMC must carefully allocate its limited production capacity between logic IC products and memory products
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
2021/08/10
Now that most negotiations over contract prices of PC DRAM for 3Q21 have concluded, DRAM suppliers’ low inventories and the arrival of the peak season for DRAM procurement have resulted in a 3-8% QoQ increase in PC DRAM contract prices for 3Q21, although this is a relatively muted growth compared to the 25% increase experienced in 2Q21, according to TrendForce’s latest investigations However, demand for PC DRAM in the spot market began to show signs of bearish movement in early July ahead of time, as DRAM suppliers continued to lower prices in order to adjust their DRAM inventories Regarding the contract market, PC OEMs currently carry relatively high levels of DRAM inventory because they substantially stocked up on PC DRAM beforehand in anticipation of an upcoming shortage Not only has PC OEMs’ high DRAM inventory put downward pressure on possible price hikes for PC DRAM, but the gradual lifting of COVID-related restrictions in Europe and the US will also likely lower the overall demand for notebook computers, thereby pulling down the overall demand for PC DRAM TrendForce therefore forecasts a 0-5% QoQ decline in PC DRAM contract prices for 4Q21
Regarding spot prices of DRAM modules, most major module suppliers have also started to lower prices in an attempt at inventory reduction, leading to a persistent downward trend for spot prices of PC DRAM modules throughout August According to TrendForce’s findings, this decline in spot prices of mainstream PC DRAM modules, which began on May 20th, accumulated to 32% as of August 3 Furthermore, spot prices of PC DRAM modules have, for the first time in 2021, now fallen below contract prices for 3Q21 by almost as much as 20% and are unlikely to experience a price hike in the short run
Since PC OEMs still keep a high inventory of PC DRAM, their upcoming procurement activities for PC DRAM will likely remain sluggish
An overview of the PC DRAM market throughout 2021 shows that, as the COVID-19 pandemic reached its peak in 2Q21, most purchasers aggressively stocked up on various components, including memory solutions, in order to avoid possible shortages, and these stock-up activities were particularly bullish in the PC market As a result, PC DRAM prices underwent a massive 25% increase in April, and demand bits also saw a surge during the quarter
Moving into 3Q21, buyers and sellers in the PC DRAM and server DRAM markets found it difficult to reach an agreement while negotiating over contract prices throughout the end of July As such, the increase in PC DRAM prices for 3Q21, along with the increase in PC DRAM sales bits, is significantly weaker compared to 2Q21 In addition, TrendForce indicated at the end of June that most PC OEMs were carrying about 8 to 10 weeks’ worth of PC DRAM inventory, with some even surpassing 10 weeks Their inventories have not undergone significant improvements as of early August As these PC OEMs gradually take delivery of DRAM they procured for 3Q21, some of them now carry inventories exceeding 12 weeks’ supply TrendForce therefore believes that the persistently growing inventories of PC OEMs will likely result in a further weakening of PC DRAM contract prices in 4Q21
Looking ahead to 4Q21, TrendForce expects PC shipment, particularly Chromebook shipment, to remain in a downward trajectory following increased vaccinations in Europe and the US The latest data show that branded Chromebook shipment peaked in 2Q21 and subsequently underwent monthly declines following this peak Furthermore, the overall demand for notebook computers has started waning as the general public resumes its day to day activities, such as a return to offices and schools, in light of the gradual lifting of COVID-19 restrictions in Europe and the US Hence, TrendForce believes that, despite the cyclical upturn of the notebook market in 4Q21, as well as the commercial segment’s replacement demand, ODMs will likely continue to cut back on notebook production on a quarterly basis, in turn decreasing the overall demand for PC DRAM
Prices of both consumer DRAM and graphics DRAM are expected to enter into a downturn in 4Q21 owing to weak supply and demand
In sum, the sufficiency ratio of PC DRAM increased from -113% in 3Q21 to 028% in 4Q21 Hence, TrendForce expects contract prices of PC DRAM to take a downward turn in 4Q21, while prices of DDR4 consumer DRAM, which are highly correlated with PC DRAM prices, will likely undergo a similar decline Likewise, contract prices of graphics DRAM are expected experience a looming decline as well, since the sudden cryptocurrency downturn resulted in a corresponding plummet in cryptocurrency mining demand and, by extension, spot prices of graphics DRAM, which is used in cryptocurrency mining equipment
Regarding server DRAM, contract prices are expected to mostly hold flat, without noticeable hints of price hikes, in 4Q21 This trend can be attributed to the server industry’s migration to Intel’s new Ice Lake platform, which has been steadily rising in terms of penetration rate, as well as the fact that demand for servers has yet to weaken However, MoM declines in server DRAM contract prices may potentially take place in November and December Likewise, mobile DRAM prices are expected to remain relatively unchanged in 4Q21 compared to the previous quarter The profitability and ASP/Gb of this product category are relatively lower compared to other DRAM products, such as PC DRAM and server DRAM, and it did not experience as much of an uptrend during the prior quarters Hence, while PC DRAM prices are expected to decline in 4Q21, mobile DRAM prices will remain sustainable, without undergoing a similar decline
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms Latte Chung from the Sales Department at lattechung@trendforcecom
For additional insights from TrendForce analysts on the latest tech industry news, trends, and forecasts, please visit our blog at https://insidertrendforcecom/
