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  Date: 29/09/2013

Fire accident at SK Hynix fab causes DRAM price hike

DRAMeXchange has reported the fire accident experienced by SK Hynix's Wuxi plant has led to a sudden surge in market demand. DRAMeXchange said the spot market prices for mainstream PC DRAM 2Gb chips have soared by a whopping 36% since the day of the fire (the calculation is based on the chip's agreed price of $US 2.18 on 9/24).

Following are the other points from the DRAMeXchange' release on this subject:
A growth of at least 10%, it is worth noting, is also expected for the soon-to-be-announced September contract prices. Given that SK Hynix was originally the supplier with the highest market share in the graphics memory market (leading both Samsung and Micron), a major shortage in graphics DRAM (for instance, DDR3x16, GDDR3, and GDDR5) has inevitably occurred. The Taiwanese companies with noticeable, though much lower, shares in this market include Nanya and Winbond.

Graphic memories have, since the very beginning, belonged to a niche market, with price movements that generally correlate strongly with those of PC DRAM. Given that their supplies had traditionally always remained steady, a habit has never really been developed on the part of many manufacturers to maintain a "safety" inventory level for their graphics-based memory products. In the periods following the Wuxi plant fire accident as well as the heightened uncertainty in the supply side, SK Hynix's ability to meet its supply schedules has clearly become restricted. This has immediately caused the market prices of graphics memory to fluctuate and, later, prompted relevant manufacturers with no more than one month's worth of inventory to scout for other supply sources (some of these graphic chip makers include notable companies such as nVIDIA and AMD).

According to TrendForce, the price for the most popular memory product (DDR3 4Gb 256Mx16 1866/2133MHz) has already managed to rise by 20% since the 9/4 fire accident to approximately US$ 3.95. It would not be unreasonable, in the following periods, to expect the said price growth to eventually surpass that of PC DRAM. With regard to the high end GDDR5 2Gb chips, given that the number of suppliers are getting increasingly lower, the official prices have exceeded US$ 3.8.

TrendForce believes SK Hynix's fire incident will impact the entire DRAM industry significantly. Other than the prices for PC DRAM (which has been soaring ever since the fire accident) and the supplies of graphics memory components, the prices of products such as server DRAM and specialty DRAM are also likely to be affected. Sources with familiar knowledge of semiconductor plants have already indicated that the recovery period for the Wuxi plant would take as long as three months to half a year. Thus, from 4Q13 to 1Q14, the market supplies are expected to remain tight.
Author: Srinivasa Reddy N
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