DRAMeXchange has reported worldwide commodity DRAM output continues to shrink going into the second quarter, PC OEMs have already begun restocking, which has benefited contract prices. Continuing the fourth month uptrend, 4GB contract price increased by 8% in 1HApr., with an average price of US$25.5 and a high of US$26. This marks the fifth consecutive month of DRAM price increases, and a historical high of US$30 is not far off.
Rest of the analysis by DRAMeXchage:
With the rise of smartphones and tablets, the decline of PC shipments is an established fact. As such, DRAM suppliers are gradually focusing their production plans on other DRAM products like mobile and server DRAM, both of which are more profitable than commodity DRAM. As supply adjustments are made, commodity DRAM supply and demand will gradually return to a more balanced state. Furthermore, uncertainties due to the merger between Micron and Elpida have pushed PC OEMs to restock early, which has contributed to the DRAM price uptrend. While recent events like the March 27th earthquake in Taiwan and the North Korean missile threat have not significantly affected DRAM supply, but buyers may be anticipating shortages and restocking early to avoid supply problems down the road. However, as commodity DRAM output has decreased, the DRAM market has become a seller's market; with PC OEMs scrambling for stock, cost has increased. Similar price trends are reflected in mobile and server DRAM products, and DRAM makers are gradually seeing profits again. In the long run, if the industry is able to maintain balanced supply and demand, average selling price for DRAM will continue to improve, avoiding the vicious cycle of dramatic highs and lows that has plagued the market in the past.
Revenue of Global Memory Market to Arrive at $US 34.6 Billion, Mobile DRAM Expected to Show 31% Growth
In recent years, the constant state of oversupply in the global memory market has taken a toll on not just PC DRAM prices, but also those of the more profitable server and mobile DRAMs. Even with the annual growth in production volume, the DRAM industry’s total revenue has experienced a yearly decline since 2010. During 2012, 2Gb DRAM prices dropped to as low as $US 0.6, whereas overall DRAM revenue shrunk to approximately $US 26.5 Billion. The long term losses suffered by the industry had been severe enough to prompt first-tier DRAM manufacturers to lower their capital expenditures, encourage firms like Elpida to merge with Micron, and force a large majority of Taiwan’s manufacturers to pull out of the DRAM market. Following the lowering of DRAM output and the various delays experienced in the technological migration processes, DRAM bit growth saw a negative revision last year and dropped to less than 30% (a far cry from the traditional 50% growth observed in previous years). In an attempt to adapt to the changing demands within the end-market, more and more DRAM makers are shifting their attention from PC DRAM to mobile DRAM. While the resulting technological migrations have contributed to an overall increase in DRAM bit growth, new production capacity has yet to be spotted.
The DRAM price situation arguably took a turn for the better in 2013, when market supply and demand gradually returned to healthier levels. The reduced production of PC DRAM has spurred a series of upward price movements, which not only allowed mobile DRAM prices to remain steady, but also led to an increase in server DRAM prices. Assuming that supply volumes undergo little change, TrendForce forecasts that the DRAM ASP (average selling price) will show a growth of at least 6% during 2013, and that the industry’s overall revenue will rise to approximately $US 34.6 Billion (a growth of 30% compared to the previous year). Due to the popularity of smartphones and tablet PCs, the growth in the output value for mobile DRAM is expected to increase by 31% from last year. The overall price growths in DRAM products is likely to help many DRAM manufacturers recover from the losses incurred from previous years. As the Korean manufacturers have successfully transitioned to 2Xnm manufacturing processes, their profitability prospects are expected to be relatively better. On the whole, the financial prospects look bright for DRAM manufacturers as the adjustments experienced by the industry come to an end.