DRAMeXchange

DRAM contract price showed signs of bottoming out in April, with a strong rebound soon followed in May. Price of 1GB part has surged by 30% from US$17.50 in April to US$22 in July. Spot price of the same-density 667MHz part, however, has dipped by approximately 9% from US$2.16 to US$1.97 in the same period.

DRAM transaction and pricing were being discouraged after price of DDR2 eTT (both 512Mb and 1Gb) posted a sharp decline during July 7-11. DRAMeXchange records that prices of 512Mb and 1Gb have been dropped by 6.2% and 5.6%, respectively, during July 1-15. In the branded segment, prices of 512Mb 667MHz and 1Gb have been also dropped by 2.9% and 5.9%, respectively, in the same period.

In the DRAM industry, traditional ArF dry lithography equipment is still the mainstream fabrication tool, with its physical limit being identified at 65nm. This implies that for any design geometry that is smaller than 65nm, shift to immersion tool is necessary. (Note: Immersion tool utilizes water to replace air as media in between lithography lens and wafer surface for circuitry patterning. Since water delivers a higher refraction rate, smaller linewidth resulted thus breaks physical limit.) Vast capex required for process node advancement, especially procurement of expensive immersion tool, is a big challenge for those DRAM makers who are still bleeding in red.

A low transaction volume during seasonal downturn is normal, but a divergent price trend in two market places is indeed rare. spot price of eTT 1Gb dropped by 8.4% in two weeks’ time, down from the high-level US$2.15 in mid June to US$1.97 on June 30. A divergent price trend is observed in DRAM contract and spot market. While DRAM contract price is trending up steadily amid tight supply, the downward spot price trend only reverse to a flat trend last week after experienced consecutive drops since mid June.

A dismal DRAM spot price is observed last week due to: 1, PC shipments likely to fail expectation in 2Q; 2, flurry of speculations about possible circulation of defective Samsung chips at spot market. Magnitude of price drop was relatively sharp at 5%, with price of DDR2 eTT 1Gb once dropped below US$2.

DRAM transaction remains slow in the spot market last week. As both demand and supply volume reduced, a mild price decline is observed, with price of DDR2 eTT 1Gb maintained at US$2.10 range. DRAM spot prices are expected to have a mild consolidation in the near term, but the downside should be limited. DRAMeXchange believes spot pricing should go steadily up in 3Q.

Despite a low volume transaction atmosphere persisted last week, spot price of eTT DDR2 appreciated by ~5% after a Korean maker said to have reclaimed those defective DRAM chips from OEM customers. Even without strong actual demand in the spot market right now, industry players generally think this may cause short term impact to the supply. With low downside risk of DRAM price and the upcoming hot season, speculating buying started coming back.

DRAM spot price trend was still weak last week, with price fluctuation for both eTT and branded DDR2 remained limited. Price of 512Mb DDR2 was flat at US$0.98 and 1Gb was up 1.5% at US$2.01 during May 27-June 2. Whereas for the branded segment, price of 512Mb DDR2 667MHz was flat at US$1.02 and 1Gb was down 0.9% at US$2.13 in the same period.

DRAM spot price trend did not very much affected by the Hynix China fab power outage incident. Prices generally stayed flat, instead of an expected upward in a noticeable fashion. Despite there still existed appreciation, magnitude of growth was limited. In the eTT segment, prices of 512Mb and 1Gb dropped by a respective 2.9% and 1.0% to US$1.0 and US$1.98 during May 20-26. Whereas for the branded segment, prices of 512Mb 667MHz stayed flat at US$1.04 and 1Gb 667MHz up by a mere 0.9% to US$2.17 in the same period.

A power outage accident took place in HNSL (Hynix Numonyx Semiconductor Ltd.) due to a problem in the power transmission facilities in the Wuxi Export Processing Zone. The power shut down has lasted near 16 hours from 11:30am on May 19th to 2:30am on May 20th. Hynix has confirmed the accident and believe the overall impact to the whole operations should not be severe as the emergence power supply system was activated instantly. The real impact is still under evaluation.

A power outage accident took place in HNSL (Hynix Numonyx Semiconductor Ltd.) due to a problem in the power transmission facilities in the Wuxi Export Processing Zone. The power shut down has lasted near 16 hours from 11:30am on May 19th to 2:30am on May 20th. Hynix has confirmed the accident and believe the overall impact to the whole operations should not be severe as the emergence power supply system was activated instantly. The real impact is still under evaluation.

While ASP of DDR2 512Mb and 1Gb plunged by a respective 86% and 70% and edged to makers’ variable costs in FY07, not only DRAM makers but DRAM module makers suffered. Any players, who do not manage their financials or inventory well, were all exposed to stiff risks. Yet, DRAM module makers still managed to maintain sales growth amidst the stiff pricing environment.

After slowing down on DRAM capacity ramp and yield issue on 66nm, Hynix has announced only 5% shipment bit growth in its Q108 financial result. Meanwhile, Qimonda reported a shipment bit growth decline of 9%. Inotera also showed a relatively flat QoQ bit growth while transitioning to 70nm process. Although Elpida Q1 production bit growth increased 33%, its DDR2 customers are primarily big module houses, not PC OEMs. Therefore, the low Q108 QoQ bit growth caused DRAM supply tight in contract market. In addition, because of the market stipulation that DRAM price will soon recover causing buyers to stock up their inventory, spot market price for DRAM rose significantly in April. From mid-March to early May, branded DDR2 1Gb 667MHz chip price rose from US$1.91 to US$2.16, or an increase of 11.3%, and DDR2 667MHz 1Gb eTT rose from US$1.6 to US$2.04, or an increase of 27.5%.

According to DRAMeXchange’s analysis, DRAM spot & contract price fell roughly 11% and 19% respectively. Impacted by the continued low DRAM prices, branded DRAM makers’ revenues fell roughly 5.8% compared to Q407. Except Elpida and Powerchip whose revenue increased in Q108 thanks to Rexchip’s strong production ramp-up, all other DRAM makers experienced a decline in revenues. As a result, Elpida and Powerchip both saw a slight increase in market share in Q108.

Despite transaction is not strong, DRAM spot pricing sustained a mild upward trend last week. Prices posted a surge on April 21, as evident in the 5.32% and 6.69% single-day appreciation for DDR2 1Gb 128Mx8 eTT and 512Mb 64Mx8 eTT. As magnitude of growth is rapid, sellers thus being conservative to release their stocks. After experiencing the price correction in 2HFeb, the upward price trend observed last week is the strongest single-day appreciation recently. The growth is stem from anticipation of a demand warm-up, and sellers being reluctant to sell after seeing the price correction last for that long. Such a price surge is believed to be an indicator for a possible price recovery.

After DRAM module OEM Lih Duo forced to suspend production after reporting bounce checks, TwinMOS is also said to shutter business on April 15. While some DRAM module makers are being expelled from the industry, leading players such as Kingston and Transcend, shift to enhance profit and try their best to reduce inventory level.

News flows were quite active last week, after a long period of silence. The major headlines are 1) CEO of Elpida said the company will raise DRAM contract price by 20% in April, 2) Samsung reportedly will have a similar move, 3) about 27-30mn of DRAM chips made by certain Korean vendor were found defective and rejected by customers. Some of the news mentioned above stimulated the DRAM spot price last week. The 1Gb DDR2 eTT chips were back to US$1.76 this Monday because the market participants were unwilling to sell down as prices were already low. Some buyers also turned aggressive as they reacted to the news.

Major DRAM suppliers profited from their aggressive expansion in 2005 and this good fortune continued as the price of DRAM kept on going up in 2006. However, this boom did not come without consequences. This rapid growth in capacity, in addition to an over-optimistic projection on Microsoft Vista's demand for DRAM, has caused numerous industry suppliers much suffering since 2007. As those first-tier suppliers, who are finding it difficult to squeeze second-tier suppliers out, they will see intensified cost pressure. DRAMeXchange analyst, points out that some DRAM suppliers are still considering the present DRAM depression as a best opportunity to expand their market share. The DRAM market-share game is now shifting from a knockout to a marathon without a winner, and the whole business loses, according to DRAMeXchange.

On the sideline of Nanya and Micron’s announcement of a joint venture on 50nm and below DRAM technology, Qimonda has also introduced its latest stack DRAM technology – Buried Worldline. The introduction of Buried Worldline, at the meantime, marks a farewell to trench technology on 58nm and implies that trench DRAM technology has meet its limit with sub 58nm node to all transit to stack DRAM technology.

Amid the Lih Duo bounce check issue, financial status at memory module makers again draws attention. The entire DRAM industry (except for backend houses) is bleeding in red alongside with the aggressive DRAM expansion. Take the price of DDR2 eTT 512Mb for instance, its price has been nose dived by 88.1% from US$7 in September 13, 2006 to the current US$0.83. Under this severe price pressure, memory module makers could hardly avoid losses if they fail to ease inventory fast. Those less competitive players are forced to exit the market, while those left behind strive to strengthen their competitiveness.