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Uncertainty in DRAM market to persist this year

Posted: 24 Jan 2013 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? Windows 8? Ultrabook? ProMOS? Powerchip?

According to the latest data from IHS, DRAM revenue this year will reach $30 billion, up 14 per cent from $26.4 billion last year, marking the first time since 2010 that global DRAM market revenue will rise. The market is predicted to rebound with double-digit but major risks!including potential continuing weakness in the PC market!easily could undermine hopes for a sales increase this year, added the market research firm.

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After declining in 2012 for the first time in 11 years, PC shipments in 2013 are forecast to expand by eight per cent. A major factor driving the expected rebound in 2013 will be the new generation of touch-enabled ultrabooks running the new Windows 8.

Nonetheless, there is significant risk to this assumption. The high price of ultrabooks, in particular, has thwarted adoption of the superthin computers, and the public at large has been more enamored of flashier gadgets such as tablets and smartphones.

If ultrabooks and Windows 8 do not prove to be the vaunted growth drivers that everyone hopes them to be, the demand profile for DRAM in 2013 will be markedly different, IHS noted.

A decline this year of two per cent in PC shipments, for instance, would mean that the DRAM industry remains oversupplied for the entire year, with prices falling a much larger 29 per cent than the expected 16 per cent. The net result would be a DRAM revenue decline of seven per cent to $24.6 billion!or a third consecutive year of contraction for the industry since 2010.

A number of supply-side factors also are expected to contribute to the rebound of the DRAM market this year. Among these factors are the final integration of Elpida Memory with its buyer, Micron Technology; the continued transition to 2x-nm technology of Samsung Electronics and SK Hynix; and the disposition of distressed Taiwan producers ProMOS Technologies and Powerchip Technology.

For Micron, the 2012 deal in which it purchased bankrupt Elpida of Japan will finally close sometime during Q2. This means that starting in the middle of 2013, Elpida and its associated fab Rexchip will move to Micron's DRAM technology. The transition will pave the way towards reduced output in H2, which would serve to favourably curb persistent oversupply within the industry and strengthen pricing, stabilising the market overall.

In the case of Samsung and SK Hynix, the space's most powerful DRAM producers, both suppliers will finish 2013 with about 60 per cent of their wafers at a 2x-nm manufacturing process. The move to a more efficient lithography will result in bit growth of 30-35 per cent!a boon for the players and to the industry at large.

Taiwan's ProMOS and Powerchip, currently reeling from low revenue and high debt, would likely have a positive impact on the industry if they found a buyer. The net drop in DRAM production if their fabs were sold would be minimal, but the cut in production would still help to mitigate oversupply in H1.

However, another risk that could derail DRAM prospects this year relates to what Micron does after it absorbs Elpida and Rexchip. An optimistic assumption calls for Micron to shift existing DRAM capacity from the acquired companies to the more lucrative NAND flash memory. If this happens, DRAM production would be reduced to the benefit of the industry, resulting in greater undersupply and causing correspondingly stronger prices. However, the opposite would be true!with oversupply continuing and weak prices enduring!if Micron elects to not allocate DRAM capacity from Elpida and Rexchip, for whatever reasons it chooses.

Given the notoriously volatile nature of the industry, DRAM revenue prospects remain highly susceptible to both internal and external forces in 2013, IHS indicated. A great deal rests on the verdict on Ultrabooks, Windows 8 and PCs!and on Micron's capacity allocation decisions for the rest of the industry.





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