1. DRAM MARKET UPDATE November 2014
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11/21/2014

2. A G E N D A
DRAM market entering a new phase – a more “normal” market – in 2015
Supply Trends and Risks of Change
Demand Challenges: Concentration of Growth and Content Dependence
Demand-supply balance, supplier inventory, and mix issues
Price forecast and analysis of price elasticity and resistance
Conclusions
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11/21/2014

3. Trend Towards DRAM Capital Efficiency
Trend of DRAM Capital Efficiency (Bit Basis)
DRAM companies are correct in stating that more capital investment is required for a new wafer of capacity.
Data shows that capital investment for a new DRAM bit of output has become dramatically more efficient in the past 10 years.
- due to extended use of scanners and double patterning
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11/21/2014

4. Trend of DRAM Wafer Starts and Output
Annual Trend of DRAM Wafer Starts
Annual Trend of DRAM Wafer Outs
Can be impacted by new process development
& yield improvement
Impact of longer cycle times
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11/21/2014

5. Supply Growth Still Relies on Process Transitions
2015 DRAM Production Drivers
Production growth to 56.1 BGb depends mostly on new processes
New “complex” processes reduce output rates
Lower WO/WS ratio
Cost crossover yields across more products
Product mix and new products lower output growth
LP mix
Larger die size and speed yields of DDR4 & LP4
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11/21/2014

6. 2015 Production-Related Risks
DRAM Bit Output by Process Node
Share of DRAM Bit Output by Process Node
Micron transition rate
to 20nm
Samsung, SK Hynix
transition to 2z nm
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11/21/2014

7. Specific Risks of Process Transitions
Assumed Micron + Inotera DRAM Bit Output
by Process Node
Assumed 2Z nm Share of DRAM Bit Output
of Samsung and SK Hynix
Transition can also affect ramp of L17 and M14
Upgrade fabs of multiple, non-mirrored fabs
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11/21/2014

8. DDR4 Adoption in Server vs. PCs
Hyperscale datacenter
Adoption entry in Q415
Same as last month
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11/21/2014

9. DDR2 & DDR3 Server-DIMM Price Crossover
DDR3 & DDR2 Server-DIMM Average OEM Price
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11/21/2014

10. LP4 Market Development in 2015
LP4 Penetration into Smartphone & Tablet DRAM Demand
LP4 Attach Rate in Smartphones & Tablets
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11/21/2014

11. Different Output Behavior Across Supplier Base
Q/Q Change of DRAM Production by Supplier
Changed from last month
Samsung output constrained in 1H15 by transition to 21nm and to new products – DDR4, LP4. Strong 2H15 with maturing 21nm and Line 17.
SK Hynix transition to 25nm accelerates. Higher capacity utilization.
Micron transition to 20nm and additional Inotera wafer capacity.
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11/21/2014

12. Demand: Concentrated & Content-Dependent
DRAM Demand Forecast,
5% excess production BGbit surplus
Mobile and Server DRAMs are 80% of ‘14-’15 bit growth
Dependent on GB/set growth, not set units
Elasticity and price resistance?
Suppliers with different target market strategies
Changed demand projections:
Lower mobile DRAM demand growth, limits of content in China brands as they seek volume
Higher Graphics DRAM demand – more dependent on PC graphics than game console for growth
Higher Consumer/Others growth due mostly to OTT and SSD buffers.
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11/21/2014

13. High-End Content Drives Mobile DRAM Demand
Smartphone Units by Brand Group
Smartphone GB Demand by Brand Group
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11/21/2014

14. 32GB Drives Server DRAM Demand Growth
Requires transition to 8Gb-based 32GB 2Rx4 RDIMM
Requires transition to DDR4 by OEMs and hyperscale datacenter companies
How price elastic is GB/server? Price resistance point?
Will lack of supply affect demand plans?
Process transitions affect DDR4 roadmap
Same as last month
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11/21/2014

15. Forecast of All DRAM Market Conditions
Wrong allocations in Sep/Oct – mostly from Samsung – mobile customers looking for more support
Allocation decisions more difficult if production-demand gap widens
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11/21/2014

16. Supplier Inventory & Test of Industry Behavior
Trend of All DRAM Supplier Inventory
Shipping only to Demand Requirements
A “normal” market with rising but not excessive supplier inventory
DRAM supplier ability to hold inventory in 2H 2015
Users unable to make large buy aheads
Supplier inventory does not rise as much compared to last month.
Same dynamics apply – DRAM companies have ability to hold inventory.
User buy-ahead activity and desire to stock up has big effect on supplier inventory and price behavior.
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11/21/2014

17. DRAM Inventory Trend of Leading PC OEMs
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11/21/2014

18. Low Capex Burden on Operating Cash Flow
Trend of Capital Spending of Memory Companies and Its Share of EBITDA
Excludes Samsung, Toshiba, Sandisk
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11/21/2014

19. Potential Product Mix Issues in Q3 2015
Mobile DRAM Market Conditions
PC/Server DRAM Market Conditions
More gradual mobile DRAM demand in Q315
Buildup of mobile inventory in Q215 because of excess supply and as prep for stronger Q315.
Product mix risk for PC/server OEMs in Q315 – ability of DRAM companies to control supply in Q315.
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11/21/2014

20. 4GB DDR3 SODIMM Price Forecast
4GB DDR3 SODIMM Price Trend
Average OEM low price:
Q115:
$29.50
Q215:
$25.85
Q315:
$24.65
Q415:
$25.45
27% drop
from Aug ‘14 peak to Dec ‘15
Est % ‘14-’15 drop
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11/21/2014

21. Weak Price Elasticity of GB/PC Content
Price Forecast’s Impact on PC BOM Cost
Price Forecast’s Impact on PC-DRAM Spend
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11/21/2014

22. PC Industry Price & Growth Pressures
Price Elasticity of PC Unit Demand
PC ASP Trend
Q212 to Q314
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11/21/2014

23. 16GB DDR3 2Rx4 RDIMM Price Forecast
16GB DDR3 2Rx4 RDIMM OEM Price Forecast
20% drop
from Nov ‘14 peak to Dec ‘15
Est. 7% ‘14-’15 drop
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11/21/2014

24. 16GB & 32GB DDR4 Server Modules
16GB DDR4 2Rx4 RDIMM OEM Price Forecast
32GB DDR4 4RX4 LRDIMM OEM Price Forecast
8Gb-based
In Q215
16GB DDR3 2RX4 RDIMM
Average Contract Price
32GB DDR3 LRDIMM
Average Contract Price
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11/21/2014

25. Analysis of Server-DRAM Price Resistance
Impact of DRAM Cost on Server OEMs
Impact of DRAM Cost on Hyperscale Datacenter Cos.
2015 DRAM spend up 57%
Capex up 33%
2015 DRAM spend up 22%
IT spend up 1-2%
Server Revenue up 5%
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11/21/2014

26. LPDDR2 & LPDDR3 Price Trend
8Gb LP DRAM Price Trend
16Gb LP DRAM Price Trend
Est. 13%‘14-’15 drop
Est. 18% ‘14-’15 drop
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11/21/2014

27. The Market for Mobile DRAM Applications
AP Core Mix in Smartphones & Tablets
DRAM Cost, % of China brand Smartphone Price
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11/21/2014

28. Conclusions
Changes in pricing conditions as market becomes more “normal”
Is this year an aberration or the new normal?
Concentration and content dependence of demand growth
Issues of price elasticity and resistance in certain sectors
OEMs will focus on cost reductions in and are likely to change their buying practices and behavior
Price forecast yields a revenue of $52 billion in 2015
Considerable risk of upward or downward change of supply and demand
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
11/21/2014