Contract price reaching bottom, 20-25 percent price rebound foreseeable by 2Q11

TAIWAN: According to DRAMeXchange, a research department of Trendforce, 1H’Jan. contract price is reaching the bottom. DDR3 2GB “Average” contract price is $17(USD) while $16 for “Low” contract price.

The decline is narrowed to 5-6 percent from 10 percent in the previous term. 2H’Jan. contract price is still under negotiation but we expect price will remain stable and mildly decline. With the launch of Sandy Bridge in early January, better acceptance of 64bit operation system and low memory price, new model content will be up to 4GB or above accordingly. PC-OEMs will initiate stocking inventory level at 1Q11 end and early 2Q11, which will likely to result in the rebounding 20%-25% DRAM price.

In the spot market, DDR2 and DDR3 indicates the stable trend that DDR3 1Gb is recorded at $0.84 and $1.35 for DDR2. Due to the continuous downward trend, module house and retail channel are conservative toward the market and maintained a low inventory level. With the upcoming Chinese New Year, it is expected to trigger another momentum for inventory replenishment and spot price.

2011 Taiwanese DRAM vendors’ outlook and challenge
According to our 3Q10 DRAM market share survey, shares of Korean vendors are already up to 61.2 percent, while Samsung has exceeded over 40 percent. With the threat from Korean vendors, Taiwanese DRAM vendors aggressively implement technology migration or business diversification on specialty DRAM. We have summarized the strategies as below:

Elpida Group-PSC and Rexchip:
PSC will continue strengthen the volume on foundry on non-DRAM business. 45nm products are in major production while 2Gb chip will be settled down for 63nm nodes at the purpose of comprehensive 2Gb output in 2H11. Rexchip has fully migrated to 45nm in 1Q11 and will trail run on 38nm in mid-February, which outperformed other TWN DRAM vendors in 3xnm migration. It is expected 38nm portion will surpass 50 percent by the year end while 32nm product will be in trail run as well.

Micron Group-Nanya and Inotera:
50nm yield rate is stabilized at 75-80 percent and output is aggressively enhanced at December last year. 42nm production seems fair and portion is expected to surge after mid-2011.

Specialty DRAM-Winbond:
Winbond is the good example of specialty DRAM diversification among TWN DRAM vendors. Besides the specialty DRAM and mobile DRAM, NOR Flash proportion is also pulled up significantly and ready for 65nm nodes.

Market mechanism is positive toward DRAM industry
DRAM vendors always sharply increase CAPEX to expand capacity as they see sign of another economic boom. During recession, as they facing loss and price decrease, they will continue to produce because the cost of not producing is greater. DRAM price was unable to recover fast due to this excess in supply.

DRAM vendors are struggling again after three years loss from 2007 to 2009. DRAMeXchange expect DRAM vendors will be more disciplined on CAPEX without the external assistance from Government. Market mechanism will force those cost-inferior vendors to speed up on strategy reformation. That is, we expect some DRAM vendors will make the significant strategic planning to re-shape within this year.