Bankruptcy of Elpida Brings Stability to Memory Market – Analysts

DRAM Pricing Stabilizes Due to Elpida Bankruptcy

by Anton Shilov
06/28/2012 | 01:34 PM

Pricing in the dynamic random access memory (DRAM) market has become markedly less volatile since Elpida Memory filed for bankruptcy in February, deviating from long-term trends in statistically significant ways, according to an IHS iSuppli market research firm. DRAM pricing appears to have flattened since the bankruptcy announcement, althoug the Japanese maker had been the third-largest DRAM supplier in terms of sales in the Q1 2012.

 

In the twelve week period after Elpida’s February 27 announcement, the IHS iSuppli DRAM Price Index - a weighted average of DRAM spot price - stayed within a narrow band, hovering between 235 at the start of the post-announcement period and 243 on May 21. With a starting value of 1000 at the time it was first published in 2002, the Index gives a measure of how much DRAM prices are dropping. In comparison to the period above, the spread in the DRAM Index was much larger in a similar 12-week span prior to bankruptcy, ranging from 180 at the beginning of the pre-announcement phase up to 216 at the close of the same period, or a difference of 37 points.

Another measure of DRAM pricing changes, the IHS iSuppli Momentum Indicator, has also stayed at the 50% level since the announcement, an indication of neutrality with no upward or downward momentum.


The table shows both the DRAM price index and Momentum Indicator taken in various times before and after the Elpida’s announcement.

“With things still very much up in the air on how events will unfold, industry participants seem to be waiting for some indication of what the resulting industry structure will be like after an Elpida takeover is finalized. As a result, the current pricing environment appears to reflect this mood with the DRAM market eerily quiet, accompanied by visibly less pricing volatility atypical of the industry,” said Dee Nguyen, memory analyst at IHS.

In yet another indication that the DRAM market is behaving in uncharacteristically quiet fashion, the same trend of decreased pricing volatility is true for 2Gb DDR3, currently the highest-volume DRAM chip on the market. Just one week before the Elpida notice, pricing for 2Gb DDR3 fluctuated by a steep 17% from the earlier week. In comparison, weekly pricing on the 12th week after the Elpida bankruptcy showed that 2Gb DDR3 changed by a negligible 0.7%.

 What is happening is that a storm of speculation has risen on the question of who will ultimately take ownership of Elpida, and what implications there will be for the DRAM industry when that happens.  While U.S. memory maker Micron Technology Inc. has won the exclusive right to bid for Elpida, the deal still holds considerable interest for other parties.