by Anton Shilov
10/30/2012 | 01:12 AM
DRAMeXchange, a research division of TrendForce, said Tuesday that due to the persistent oversupply situation in the global DRAM market, along with the 5% year-over-year drop in shipments of personal computers, caused prices of dynamic random access memory [DRAM] to further weaken in the second half of October. Still, as makers cut production of commodity memory, spot prices may rebound shortly.
Contract prices for 4GB DDR3 memory modules in October dropped below $16, and are continuing to approach the $15 mark. At press time, one untested [eTT] 2Gb DDR3 chip cost $0.682 on average in Taiwan's spot market, 2Gb DDR3 1333MHz/1600MHz chip's price was approximately $0.837/$0.821, whereas 4Gb DDR3 1600MHz memory IC was priced at $2.250 on average on the spot market.
The trends pose as yet another test to the cost structures of DRAM makers. With prices approaching or dropping below manufacturing cost, makers are faced with the option of either undergoing production cuts or shifting their focus towards non-DRAM products.
It seems that in the short term, prices are unlikely exhibit a major downtrend anytime soon. As the DRAM manufacturers lowering their outputs rely on the spot market for their major channels, DRAM spot prices are expected be among the first to be affected by the current wave of production cuts. First-tier module manufacturers are taking strategic initiatives to raise DRAM purchases, used to replenish as well as increase inventory. Despite the continually shrinking spot market, the movements indicated by some of the DRAM spot prices will remain leading indicators of the price trend within the contract market.
Elpida and Rexchip decided to lower their output levels in August. Powerchip Semiconductor, beginning September, took a similar initiative by adjusting P3 wafer levels. In October, Nanya and Inotera made the official announcement to implement 20% production cuts. ProMOS recently decided to quit the DRAM market due to financial woes and focus on other interests.
South Korea-based DRAM manufacturers have lower production costs than their Japanese and Taiwanese rivals, which is why they have not announced any production cuts and did not lower shipments to stimulate pricing. Still, both SK Hynix and Samsung Semiconductor initiated efforts to control commodity DRAM output ratios, increasing amount of emphasis placed on the production of the more profitable mobile and server DRAMs
Given all the above mentioned production trends and changes, global DRAM production has slid from this year’s peak 1.130 million 300mm wafers per month down to 1.050 million wafers in October. The extent of the production that has been trimmed is roughly 7.1% of the original capacity, which is around 80 thousand wafers.
From the market standpoint, as the current wave of production cuts mostly involve commodity DRAM, and as South Korean manufacturers increase the effort to lower commodity DRAM output, there is a chance that commodity DRAM prices might rebound.
At present, Samsung has decreased the commodity DRAM production ratio to around 30%, and plans to have the proportion lowered to 25% next year. For SK Hynix, commodity DRAM still accounts for 50% of DRAM output, although by 2013, the maker aims to lower the ratio to below 40%. With the merger between Micron and Elpida set to be completed as soon as during the first half of 2013, the two manufacturers’ plan is to have the factory in Hiroshima focus on producing mobile DRAM, whereas Rexchip will be responsible for manufacturing the commodity DRAM. Inotera, meanwhile, will be placing an increasing emphasis on server and mobile DRAM, while gradually lowering its commodity DRAM output. The Taiwanese company, PSC, seeks to decrease the overall DRAM production this year, given that it has its eyes set on transitioning to the foundry business. Commodity DRAM is set to only be manufactured in P3, and beginning in September, only around half of the original capacity will be used on wafer production. The production cuts, at this point, are expected to continue into the future.
Under the influence of demand-related factors, commodity DRAM will no longer account for 50% of the DRAM market like it used to. Moving into 2013, the proportion of commodity DRAM within the market is only expected to be approximately 35%. With production cuts continuing to increase, the DRAM market is expected to exhibit a mere growth of only 21%, a new low since the 2009 financial crisis. The general consensus within the industry, at the moment, is to continue decreasing bit output and to prevent a massive oversupply situation from arising.
In general, DRAMeXchange hope is that after the initial quarter of 2013, supply and demand will return to healthy levels, and in turn contribute to higher price levels and product values.