2009 Challenge for Taiwanese DRAM Packaging& Testing Industry

DRAM supply bit growth rate climbed to the rocket high to 95% and 65% in 2007 and 2008 respectively since many DRAM vendors expand their capacity without discipline. The DDR2 1Gb chip price had sharply dropped 74% to US$0.62 due to the over supply situation and global financial crisis happened in the 2H’08. With the continuous negative cash low, DRAM vendors started to implement capacity cut and shut down 8” inch fab. Compared with the wafer-production peak in 3Q08, average quarterly wafer-in production recorded 987K in 1Q09 with 31% decline rate while Taiwanese vendors suffer most with high 43% capacity cut rate.

In line with the capacity cut in DRAM vendors, currently utilization rate for Taiwanese Packaging & Testing (P&T) is around 80%~90%. PTI ranks the Top 1 Taiwanese P&T vendor with major customers such as Elpida, Kingston. FTAC is the strategic alliance with Nanya and provides total solution from P&T to module to Nanya. Walton has closer relationship with Winbond and will improve the capability on GDDR testing since Winbond will raise the product portion in Mobile DRAM and Specialty DRAM.

Taiwanese DRAM P&T：35% and 13% Revenue Growth in 2Q09 and 3Q09

Taiwanese P&T vendors record growing revenue since 2Q09 along with the recovering DRAM industry. The average revenue growth rate will be 35% and 13% in 2Q09 and 3Q09 respectively. With the raising utilization rate, we expect revenue in 4Q09 will likely surpass 3Q09. From the individual vendor perspective, PTI still occupies in the No.1 place and we expect its revenue in will hike to the peak in 4Q09 given the fact of raising utilization rate from its major customers. FTAC, one of subsidiary in Formosa groups along with Nanya and Inotera, shows the stable revenue trend and it is anticipate for a satisfactory capacity increase given the fact that single 12” wafer can generate 1,580 chips instead of 790 chips under 50nm technology.

Looking toward the future, PTI has signed the purchase agreement with Spansion about Spansion’s facility and share stakes in Suzhou, China in 8/25. PTI will take over Spansion Suzhou facility and the outsourcing orders from Spansion to avoid the over consolidated customer mix. SPIL , not primary focus more on DRAM P&T, will maintain current customer base and increase the P&T business in networking and new products. Walton plans to purchase the high speed testing equipment for GDDR and ready to take the GDDR orders from Winbond. According DRAMeXchange, 2010 will be the critical year for Taiwanese DRAM vendors that they will try to work hard on diversified product mix. That is, it can lower the downturn DRAM industry risk and strengthen capability to create more opportunity.