Company News IHS predicts gloomy DRAM returns
A DRAMATIC oversupply and freefalling prices are in store during the third quarter for the dynamic random access memory (DRAM) space, resulting in a turbulent second half for besieged DRAM suppliers, according to a new IHS iSuppli DRAM Market Brief from information and analysis provider IHS. The average selling price for Double Data Rate 3 (DDR) in the 2- gigabit (Gb) density—the bellwether DRAM product—is projected to drop to $1.60 in the third quarter, down 24 percent from $2.10 in the second quarter. The dive would be the biggest decline for the year, following a surprisingly solid second quarter during which pricing fell only 5 percent from the first quarter, as shown in the figure below. Moving into the fourth quarter, the price could plummet another 22 percent to $1.25—dangerously close to cash costs for many manufacturers. Only a year ago in the third quarter, pricing stood at $4.70.
“Contrary to typical seasonal
patterns in which prices are very soft during the second quarter, that period this year saw relatively flat, unchanged DRAM pricing compared to the first quarter,” said Mike Howard, principal analyst, DRAM and memory, at IHS. “However, companies did not capitalize on the healthy pricing levels to increase shipments in the second quarter— which, in retrospect, may have been the best time to do so.” DRAM manufacturers attribute the
low growth in shipments in the second quarter to two primary reasons: bloated inventory and challenges in transitioning to new process technologies. Taiwanese-based Nanya Technology Corp., for instance, had as much as 30 days of inventory when it started to throttle shipments, reflecting its challenges in getting material from factories into the hands of customers. For its part, South Korean Hynix Semiconductor Inc. indicated it suffered poor yields at the 38-nanometer process node, the result of ramping up
to a new process. And in the case of Idaho-based Micron Technology Inc., a large disparity between spot and contract prices in May—the company’s final fiscal month for the third quarter— prompted the firm to build inventory instead of selling into the spot market. Nonetheless, if trends in the past
are any indicator, DRAM companies not only will shift inventory rapidly but also will move quickly up the yield curve. As a result, the events of the second quarter won’t continue for long this year.
“The third quarter is shaping up to
be pretty bloody for DRAM makers,” Howard noted. “The combination of inventory reductions by DRAM makers and more bits coming out of the fabs is resulting in a very soft pricing environment.”
As much as a 15.9 percent increase in shipments is anticipated in the third quarter, and prices are not expected to firm up anytime soon because of that, IHS believes.
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www.euroasiasemiconductor.com Issue IV 2011
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