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【Market View】TrendForce:2HJun. DRAM Contract Price Trend Stays Flat After Five-Month Uptrend, Lower Spot Market Prices May Affect July Contract Price

Published Jun.28 2012,14:48 PM (GMT+8)

TrendForce:2HJun. DRAM Contract Price Trend Stays Flat After Five-Month Uptrend, Lower Spot Market Prices May Affect July Contract Price
According to DRAMeXchange, a research division of TrendForce, as a result of weak PC demand, the DRAM contract price trend stayed flat in June, bringing an end to the five-month uptrend. Average 4GB module price remained at US$21.25, while the highest and lowest prices were US$21.5 and US$21, respectively. Industry leader Samsung pushed contract price quotes up to the US$22 mark, but Taiwanese and Japanese DRAM manufacturers’ price quotes were unchanged due to weak market demand and high PC OEM inventory levels. Although the price trend stayed flat overall, most transactions were concluded at lower prices than in 1HJun. Furthermore, the majority of deals were conducted with Korean DRAM suppliers, as other makers had little room to negotiate and had no choice but to sell at flat or lowered prices in order to move stock.

Looking at the spot market, from the beginning of June up to the present (June 26), 2Gb chip price has fallen by approximately 2%. Low trading volume indicates market demand has still not picked up. 2Q is traditionally the off-peak season, and with DRAM makers continually shrinking process technology, DRAM bit supply growth is approximately 10% for the quarter. With supply exceeding demand, price negotiations are difficult and the uptrend is unsustainable. A future upturn in PC DRAM price is dependent on the stimulation of PC shipments by back to school demand as well as the consumption of PC OEM inventory levels, which would bring about another DRAM purchase cycle. In the short term, DRAM price is unlikely to rise much, and July contract price will very likely stay flat or decrease.

Mobile DRAM Production May Reach 30% of Total DRAM Output as Galaxy Series Leads Shipments, iPhone 5 Arrives in 2H12

With the rise of smartphones and tablet PCs, worldwide mobile DRAM production accounts for 21% of total DRAM output, up from 15% last year. Samsung has been the most aggressive in transitioning to mobile DRAM production, with a target mobile DRAM ratio of more than 30% for 2012. While Apple is purchasing fewer chips from Samsung in a strategic move, the Korean maker’s Galaxy series is currently the global leader in terms of shipment volume. Even if Apple takes their business elsewhere, Samsung will be able to mitigate the impact by allocating idle capacity to production of its Galaxy products. However, Apple must purchase from a certain number of suppliers in order to maintain an advantage in terms of price. With the weakening of its relationship with Samsung and the impending alliance between Elpida and Micron, Apple is increasing orders with Elpida. The significant increase in mobile DRAM production at Elpida’s Hiroshima fab will help curb Samsung’s expansion, maintaining the status of three major suppliers in the mobile DRAM industry.

Furthermore, as the upcoming iPhone 5 and mini iPad are expected to have higher memory requirements - the new iPad already sports 1GB of memory, Apple’s mobile DRAM consumption is likely to multiply in the future, which Hynix and Elpida alone would be unable to handle. As such, Apple increasing mobile DRAM orders with Samsung again is not out of the question, and prices would be renegotiated – the simultaneous competitive-cooperative relationship between Apple and Samsung is likely to continue. Therefore, TrendForce’s demand forecast for the second half of the year remains unchanged – mobile DRAM will see the most demand, while PC DRAM capacity may decrease further to maintain the currently stable price trend.