2011 DRAM industry outlook

TAIWAN: According to DRAMeXchange, the research department of Trendforce Corp., DDR3 2GB contract price has declined 46 percent from the peak $46.5 in 1H10 to the level of $40 in 1H’Sep, below $30 in 2H’Oct., and finally at $25 in 1H’Nov.

Despite the outperformed September NB shipment, the overall quarterly growth is merely 2.6 percent since the traditional hot season sales are not satisfactory.

In the DRAM output side, Samsung’s output growth will reach peak at 3Q10 given the outperformed technology node and early immersion scanner settlement and Samsung also record the good performance in terms of 3Q10 revenue.

Other DRAM vendors will sharply increase output in 4Q10 given the immersion scanner settlement in 2H10 that they tend to offer the lower price to the buyers at the pressure of sales under over-supply situation. Those factors combined result in the acceleration of price decline in 2H’Oct. contract price. DRAMeXchange expects DDR3 contract price will likely be down 30 percent QoQ to $20 by the year end.

Due to the foreseeable dropping DRAM price, DRAM vendors turn cautious toward the CAPEX. Samsung will properly adjust the Fab 16 plans based on the market condition in the future while PSC will advise down CAPEX 20 percent to NT$16 billion, while Rexchip R2 expansion plans will be postponed.

From the investor conference on 11/4, Elpida declared the monthly 60K capacity reduction in commodity DRAM and will either lower the outsourcing orders or commodity wafer-in in Hiroshima fabs.

In 11/8, PSC announced on 10-15 percent capacity reduction on commodity DRAM and will revise the capacity to foundry area. It is also said that Hynix 3Q/4Q output will be impact by the unsatisfactory yield rate in 44nm process.

DRAMeXchange expect 2011 DRAM supply bit growth will increase 50 percent given the accelerated migration. Samsung expect 35nm portion will be over 50 percent in 2H11 while other vendors such as Hynix, Micron and Elpida will MP 3xnm in 2Q10. Taiwanese vendors aim at the 4xnm migration at the purpose of lowering cost for DRAM dropping price.

DRAMeXchange expect DRAM price will bottom up from the 1Q11 or end of 2Q11. 2011 PC growth rate is estimated at 11.8 percent and tablet will stimulate over 80 percent growth demand in mobile DRAM.

However, DRAM vendors will be more conservative toward the CAPEX in 1H11 with the concern in dropping price. It is anticipated that lower DRAM prices in the coming quarters to boost the content growth from 2Q11.

We forecast that the 2011 content for DT and NB will increase 36 percent YoY and 31 percent YoY to 4.22GB/4.00GB, respectively. Netbook content will be also pulled up to 2.13GB with 105 percent YoY with affordable price and 2Gb chip migration.