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Falling PC OEM demand saps DRAM contract price

Posted: 11 Sep 2012 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM contract price? PC OEM? IP technology?

According to DRAMeXchange, 2HAug contract price for DRAM has been showing persistent drop, with DDR3 4GB price falling to the $18 mark, a four percent decrease. The price has dropped to as low as $17.5, which represent more than a five percent decrease. The 2GB contract price dipped by only 2.4 percent, and fell to about $10.25. In total, the overall price drop amounts to 10 percent, the highest this year for a single month, revealed the research arm of TrendForce.

Because of the weakening global economy, the overall PC shipment rate, compared to last year, has been adjusted to -2.5 percent, with dwindling PC demand leading DRAM inventory levels to reach to 8-12 weeks. At the moment, PC OEM's Aug DRAM purchase quantity has been decreased to half of its original amount or less.

According DRAMeXchange's assistant VP, Ken Kuo, because of the faster than expected price drops, first-tiered DRAM manufacturers are making a transition to mobile DRAM and server DRAM in order to minimize the downward price adjustment's overall impact. Second-tiered manufacturers, on the other hand, face a crisis in which prices have dipped below cash cost. In order to avoid negative cash flow, these manufacturers need to decide on whether to cut down on production, to make a transition to different DRAM models, or to quit the DRAM market altogether.

Following the continuing downward DRAM price adjustments and the deteriorating market, Nanya has officially stated on Aug 28 that it would be quitting the standard DRAM industry, focusing instead on the manufacturing specialty DRAM. This move marks the complete exit of Taiwan DRAM manufacturers from the industry.

As regards Taiwan's DRAM market, given the capabilities of its 12in production plants, as Nanya shifts toward the manufacturing specialty DRAM, the market's cost structure will likely to become better than that of the IC semiconductor companies. However, looking at Nanya's near 60K production capacity, how to efficiently use, manage, or cut down the production of chipsets will be an issue the company will eventually have to work out.

With regard to Inotera, Nanya's exit points to the possibility that the former company will intensify its partnership with Micron. The key for Inotera's success, in terms of product mix, will depend on how well it is able to seek out highly profitable products like mobile and server based DRAM.

With LCD drivers and power IC improving profitable gains in the foundry manufacturers business, P1 and P2, at the moment, have been able to maintain high capacity utilization rates. Facing downward price adjustments, powerchip manufacturers are contemplating about decreasing P3 production volumes in order to prepare for future market development.

Rexchip faces a similar situation with Inotera. Both are pure foundry fabs, and both have efficient production techniques and stable production yields. It is expected that the company's future partnership with Micron will help increase the mother plant's production output.

Due to increased monetary liability, ProMOS has chosen to leave the market completely and has stopped wafer start during mid-July. With its IP technology, however, it is possible that ProMOS will shift its focus and start over as an IC design company.

According to TrendForce, the future DRAM market will likely be dominated by Samsung, SK Hynix and Micron. With the market gradually assuming an oligopolistic form, Taiwan DRAM manufacturers have begun to make a transition to foundry business, focusing on non-standard DRAM products and seeking further industry restructuring and transformation opportunities.





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