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Poor economy, oversupply slump DRAM revenue

Posted: 08 Nov 2011 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM industry? oversupply? contract price?

Total revenue for global DRAM industry was almost $6.566 billion in 3Q11. DRAMeXchange, a research unit of TrendForce Corp., said the remarkable decline was due to a weak macroeconomy and worsening oversupply. The average contract price for DDR3 2Gb dropped 35 percent in Q3, and total revenue plunged by 19.4 percent QoQ.

DRAM industry is officially headed into another bleak period, said DRAMeXchange, except for Samsung, as the rest have been spilling red ink. From the supply perspective in Q3, some DRAM makers made production cuts as chip price fell below cash cost. Thus, production volume increased by only five percent QoQ, compared to the historical average of more than 10 percent QoQ growth for Q3. However, first-tier DRAM makers continued to adopt 30nm/40nm node processes. For instance, 30nm products from the two major Korean makers account for 21 percent of total industry output and Elpida, with support from their subsidiary company Rexchip, is expected to increase their 30nm output in 1H12. However, Taiwan makers are still producing mainly on 40nm/50nm technology, representing at least a generation and a half of lag behind Korean DRAM makers. Taking the bleak market status into consideration, it is highly unlikely that DRAM manufacturers turn profitable again in the near future.

As for demand, the weak macroeconomy has lowered consumer confidence in European and U.S. markets. The historical Q3 average of 10 percent demand bit growth was not met this year, with only 7.6 percent QoQ growth in 3Q11. Furthermore, PC growth was mainly attributed to China and other emerging markets, and total PC content per unit has not increased significantly in Q3. Overall, notebook (excluding netbooks) content per unit was only 3.5GB, a slight increase of 1.1 percent QoQ. Luckily, benefiting from PC OEMs' September inventory restocking in preparation for the holiday season, DRAM inventory levels have decreased significantly. Even spot price stabilized temporarily in 1HSep. As a result, 4GB contract price decreased by 2.33 percent in October, and other prices stayed flat. The DRAM price trend in Q4 will depend on the impact of the Thailand flood-induced HDD shortage on PC shipments.

Revenue Ranking of Branded DRAM
As for global DRAM manufacturers' branded DRAM revenue ranking, the Korean makers took first and second place. Samsung's Q3 DRAM revenue fell by 12.8 percent QoQ, but as this decrease was less than that of other makers, their market share was up 3.4 percent, for a total of 44.5 percent of the market. DRAM ASP decreased by about 15 percent QoQ. Benefiting from having more than 30 percent of their output from 35nm processes as well as capacity allocation to sever and mobile DRAM, Samsung turned in impressive figures for the quarter, with bit growth at seven percent and operating profit above 20 percent in Q3, stated DRAMeXchange.

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