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Weak PC demand drags DRAM price

Posted: 30 Nov 2011 ?? ?Print Version ?Bookmark and Share

Keywords:DDR spot price? DRAM market? oversupply?

Due to the problems caused by the Thailand floods to the HDD supply chain and the weak PC season, the drop in contract price stuck in 2H11. This is according to DRAMeXchange, a research arm of TrendForce Corp., that revealed the ASP of DDR3 4GB dropping by 7.9 percent to $17.5, while DDR3 2GB ASP fell below $10 to $9.5, a 7.3 percent decline.

From the market perspective, due to the weak demand for PC in Novembersome PC OEMs' orders were even canceledthe market remained slow. Affected by the inventory pressure, several DRAM manufacturers resorted to cutting prices. In addition, the DDR3 2GB spot price dipped 25 percent compared to last month. This gave the clients an edge in the contract price negotiation and in turn furthered the price drop. Although DRAM makers such as Elpida and Nanya downsized their capacities in November, the effect of downsizing will not kick in until 1Q12. In the short term, the DRAM market will still be in a state of oversupply, with the contract price downturn most likely to continue through the end of the year.

The contract price of DDR3 2GB dropped from $18.75 in May to the current ASP of $9.5, a 50 percent decrease. The spot price of DDR3 2GB plunged by 70 percent to $0.74. With price falling below the cash costs of many DRAM makers, companies with weaker financial health have downsized their capacities or shifted their focuses to other sectors. On account of its unbalanced financial condition, ProMOS was the first company to downsize the wafer start volume, which was reduced from 50K level in July to about 5K at present. As for PSC, due to the decreased orders from Elpida and the company's increasing focus on OEM business and flash products, the wafer start volume of PSC's standard DRAM was reduced from 80K per month to about 20-30K. In light of the persisting DRAM price downtrend in 2H'Oct, more DRAM makers have downsized their capacities in November. Nanya not only downsized its mother plant's wafer start volume by 20 percent but also reduced its wafer start volume in Inotera. Moreover, Nanya also aims to strengthen its consumer DRAM business in the hope of cutting loss. The Hiroshima plant of Elpida is scheduled to reduce capacity by 25 percent. Rexchip will decide whether or not to downsize in December.

According to the survey from TrendForce, due to the production cut in November, the global DRAM industry's wafer start volume fell from 1300K per month to about 1100K, representing a 16 percent downturn. Considering the DRAM manufacturers' active attitude toward the 30nm and 20nm process migration and the PC slow season in 1H12, DRAM is expected to continue facing serious oversupply. Currently, the decrease on wafer start will help stabilize the price, but a balanced supply and demand hinges upon whether the global brands, including Samsung and Hynix, will join the ranks of downsizing and whether ultrabook and Windows 8 will spur the demand next year. If not, the continuous production cut may trigger DRAM companies to merge, resulting in an oligopoly market. In this case, the industry will be depending on the market mechanism to weed out the weak and aid the DRAM price to rebound gradually in 2H12.

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