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4GB average contract price increases 5% in 1HMay

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According to DRAMeXchange, a research division of TrendForce, as DRAM makers hope contract price will increase by 7-10%, 4GB price will be in the US$22-23 range. However, as PC OEMs’ DRAM inventory levels have already reached 3 to 4 weeks’ worth – some Taiwanese PC OEMs have even amassed over 2 months’ worth of stock.Additionally, uncertainty on the European market has resulted in a conservative demand outlook for 2H12, furthering complicating 1HMay contract price negotiations. Thus, prices were not set until the fourth week of May, at US$21.25 and US$11 for 4GB and 2GB modules, representing increases of 5% and 4.8%, respectively.From the market perspective, although the commodity DRAM market is still in oversupply, first-tier DRAM makers are aggressively reallocating capacity from commodity DRAM to the more profitable mobile and server DRAM. Supply and demand fluctuations have enabled the commodity DRAM status to become healthier. On May 10, Micron and Elpida announced their alliance and subsequent integration. Their combined market share will rival Hynix’s, and the DRAM industry will see the emergence of three major players, marking the official transition to an oligopoly market. DRAM Makers Turn Attention to Mobile and Server DRAM Production in 2012In the past two years, the DRAM industry has experienced major structural changes – in the second half of 2011, commodity DRAM price fell by a 50%. PC content per box increases were limited, and one by one Taiwanese DRAM manufacturers either cut production or transitioned to foundry business.Top-tier DRAM makers like Samsung and Hynix followed plans to decrease their commodity DRAM production ratios, reallocating capacity to more profitable mobile and server DRAM. According to TrendForce analysis, based on chip output, Korean DRAM suppliers’ commodity DRAM accounts for only 40% of total production, far less than Japanese and Taiwanese makers’ 60% commodity DRAM ratio. he result of product diversification is reflected in the Korean makers’ glowing earnings reports – Samsung’s 15% profit margin for semiconductor sales is a prime example of the success of product mix optimization.Looking at process technology, as the popularity of smartphones and tablet PCs continues to rise and cloud application demand grows stronger, DRAM suppliers are placing priority on mobile and server DRAM production when it comes to the most advanced processes.For instance, Korean manufacturers began LPDDR2 production on the 30nm process some time ago, while LPDDR3 has been sent to manufacturers for testing and is scheduled for mass production in the second half of the year. 4Gb server DRAM chips will be produced, to fulfill clients’ power-saving and density requirements.Although Elpida and Micron are still in talks over integration, due to strong demand from top-tier mobile phone makers and new models coming out in September, mobile DRAM wafer start volume at the Hiroshima fab was increased to 60% of total capacity in May, while 70% is scheduled for June.Micron has made progress in the server DRAM market – Inotera’s server memory accounts for 40% of total output, and is expected to reach 60% in the second half of the year.As a result, PC DRAM output will only account for 45% of total DRAM industry production in 2012, an 8% decrease compared to last year’s 53%. Combined, mobile and server DRAM take up 40% of production, a significant 10% increase over last year. For the DRAM industry, product diversification will increase added value and prevent commodity DRAM price slashing, thereby stabilizing the industry.An oligopoly market will gradually emerge, and the surviving memory makers will get to reap the long-awaited fruits of their labor.


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