First half of DRAM industry: DDR2 yields improve but price down stimulate reallocation

Under the pressure of low yields on DDR2 migration and suspicious wafer damages in the first quarter, bit growth for DRAM supply only grew by a slight single percentage point in January. Spot price of mainstream DRAM chip, 256Mb 32Mbx8, stayed above US$4 in January and started declining from middle of February. Furthermore, spot price dropped to US$2.5 during late March amid the stronger supply bit growth and the declined notebook and motherboard shipments.

DRAM makers report a bit growth rate of 12% in the second quarter, thanks to the improving yields and the 16% on-quarter 12-inch wafer capacity growth. Mainstream DRAM spot prices, at the meantime, were dragged further to the range of US$2.3-2.4 in the second quarter while contract price for 256MB DIMM was hanged as low as US$20 (US$2.25-2.3/chip) during April to May.

Driven by the weak DRAM pricings, most DRAM makers suffered loss in the second quarter. The continual price downs had already dropped below the average production cost of US$2.6 (include front-end and back-end) during this timeframe. However, prices stayed over the variable cost which DRAMeXchange estimates around US$1.5 . Concerning the continual price downs, DRAM makers have turned aggressively allocate more capacity from DRAM to NAND Flash and other niche ICs including graphics chips use memory, mobile RAM, CMOS image sensor productions. Some memory makers are also raising their proportion of foundry service upon profit concern.

Among various categories of IC, DRAM and NAND Flash maintain their roles under the spotlight with a relatively more capacity allocated for these memory ICs productions.

Motherboard shipments upbeat to boost DRAM shipment

DRAMeXchange forecasts that prices of DRAM should moderately pick up but the upward strength will tend weaker as demand bit growth should lack behind supply bit growth by 4.4 percentage points in the fourth quarter.

Ramping motherboard and notebook shipments should further boost DRAM shipment growth from September. We estimate that first-tier local motherboard makers will report a sequential 8% shipment growth in September while the top six notebook ODM makers should also enjoy a 9% shipment growth.

Both spot and contract DRAM prices should escalate, buoyed by the back-to-school demand in September. Noted that the keep escalating 12-inch wafer output and better-than-expected 90nm migration should constrain the price upbeat in the fourth quarter.

By Judy Chen, Marketing Intelligence Team, DRAMeXchange