1. DRAM MARKET UPDATE October 2014
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

2. A G E N D A Q4 2014: Transition to a New Stage of the DRAM Market
Macro View of DRAM Market Conditions in 2015
Micro View and Price Forecast of DRAM Market Segments
PC DRAM
Server DRAM
Mobile DRAM
Conclusions
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

3. DRAM Market Entering a New Phase
CURRENT PHASE:
Transition Period
Q414 – Q215
NEW PHASE: 2015 – 2016?
3 year capex reductions
100%+ capex increase in 2014
24% wafer capacity reduction
Net wafer capacity increase across supplier base
Limited new process transitions
New process transitions
across supplier base
Mobile-centric, PC-averse product mix actions
Slowing mobile apps
Stimulate GB content
New products limited
to LP-DRAMs
DDR4, LPDDR4, Wide-IO2, HBM, HMC
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

4. Memory Capex Burden on Cash from Operations
DRAM Suppliers’ Memory Capital Spending and Share of EBITDA
113% YTD
In Q214
------Consolidation Period -----
$9.4B in 2014
88% growth
$17-18B with Samsung
NOTE: Data excludes Samsung
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

5. DRAM Capital Spending on the Rise
Trend of DRAM Industry Capital Spending
127%
growth
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

6. Forecast of All DRAM Market Conditions
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

7. Production and Supplier Base Forecast
1% net wafer start increase ‘14-’15
1% net wafer out reduction ‘14-’15
26% bit growth mostly from process transitions
2015 bit output: billion Gbits
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

8. Sources of 2015 DRAM Demand
Demand 7% below current production est. of 56.5 BGb
set unit build growth
PC: 2-3%, Server: 4%, smartphones: 17%
DRAM companies need to stimulate GB content of servers & mobile DRAM
Server: DDR4, 32GB RDIMM
Mobile: LP4, 8Gb lower cost
PC content growth may be inelastic against price
PC profit margin recovery
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

9. Trend of DRAM Supplier Inventory
Trend of All DRAM Supplier Inventory
Becomes major supplier concern in Mar-Apr
Starts to tick up in Dec 2014
Assumes extra bits pushed to market to constrain rise of supplier inventory
User inventory rises based on their perception of risk – gradual buys
Increases buyer leverage
Major demand surge or supply control needed to reduce stock
End of year uptick signals excess supply
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

10. Mobile and PC/Server DRAM Market Outlook
Mobile DRAM Market Conditions
PC/Server DRAM Market Conditions
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

11. PC DRAM Market Outlook
PC unit build downward adjustments; more to come?
Effect of Kingston-initiated price reduction has dissipated
Reduced high end of price range
PC OEMs have enough committed supply
PC OEM DRAM inventory has stopped falling since July but level of inventory is still at borderline for efficient supply chain
Some DRAM companies attempting higher, quarterly prices
Low Q314 price up in Oct but other prices should remain the same
PC movement to DDR4 or LPDDRx: still being defined
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

12. Change in PC Unit Builds
Changes in PC Unit Build Forecast
Trend of PC Unit Builds (Sep ‘14 forecast)
Q214  Q314
Change in growth
From 14%  10%  8%
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

13. PC OEM Inventory Has Bottomed
Est. PC OEM DRAM Inventory
Indicates that PC companies have enough 2H14 supply
Borderline supply chain efficiency
Not enough user inventory to direct DRAM prices
Falling channel prices indicate excess supply in some PC markets
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

14. PC DRAM Market Conditions
Changes in PC DRAM Demand & Production
Est. PC DRAM Supplier & User Inventory
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

15. 4GB DDR3 SODIMM Price Forecast
4GB DDR3 SODIMM Price Trend
27% drop
from Aug ‘14 peak to Dec ‘15
Est % ‘14-’15 drop
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

16. RDIMM Market Outlook
DRAM companies will be motivated to increase GB content in and DDR4 penetration
More core performance, more memory needs
Move to 32GB RDIMM for mainstream status in 2016: share of modules constrained to 15-20% in 2015
Q215 projected to be turning point
DDR4 test yields will stabilize and test costs will be lowered
8Gb yields will improve through Q215
Boost in DDR4 usage in 2H15 from adoption by hyperdatacenter companies and server channel players
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

17. Server DRAM Market Conditions
Changes in Server DRAM Demand & Production
Est. Server DRAM Supplier & User Inventory
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

18. DDR4 Adoption in Server vs. PCs
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

19. DDR4 Adoption in Server vs. PCs
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

20. DDR4 Adoption in Server vs. PCs
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

21. 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
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

22. 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
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

23. Mobile DRAM Market & Pricing Conditions
SK Hynix still slowing 25nm wafer starts in Q due to mobile demand
Normal price reductions may return in 1H 2015
Potential overbuild of phones (not yet included in forecast)
DRAM companies need to push GB/phone in 2014
Excess production will keep mobile-DRAM production going through slower seasonal demand growth
LPDDR4 price positioning similar to LPDDR3 but earlier in year
LPDDR4 production improving but supplier base not stable until Q214?
Will slow LPDDR3 price descent
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

24. 16Gb LPDDR2 and LPDDR3 Price Forecast
16Gb LPDDR3 & LPDDR2 Average Price Trend
16Gb LPDDR3 & LPDDR2 Low Price Trend
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14

25. Conclusions Market headed to a new 2-year market stage
2014 was an unusual year mostly because of the Wuxi fab fire
Industry needs to learn capital efficiency
Consolidation is about profit preservation, not price control
Need to stimulate GB content growth in mobile and servers
Motivation to move to DDR4 and LP4, 8Gb density
Downside risks in prices and upside surprises in 2015
Global economy: slowing European economy
Smartphone set price and profit margin pressures
Micron 20nm transition
DDR4 in PCs
© 2014 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission.
10/14/14