1. DRAM MARKET UPDATE November 2013
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11/25/13

2. A G E N D A DRAM Production Trends DRAM Demand Trends
Demand-supply and Inventory Conditions
Price Correction Window
Price transition to new Products: LPDDR3 and DDR4-RDIMM
Conclusions and Recommendations
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11/25/13

3. Highlights of DRAM Supply Outlook
DRAM Production Bits and Mix Trends
SK Hynix recovery1 from Wuxi fab fire by Jan/Feb 2014
Net wafer capacity and wafer-start increase – transfer from NAND
Productivity gap across suppliers widens in Q through 2014
Market share shifts in 2014
Production growth to slow in 2H with 2Ynm maturity and long transition to 2Znm
Seasonal DDR3-LPDDRx allocations will continue
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11/25/13

4. DRAM Supply Developments & Outlook
Y/Y Change
2013
2014
Wafer Outs (K)
K wafers 7% 6%
2013 driven by higher utilization driven by additional capacity transferred from NAND
Productivity (Gb/w)
Gbit/wafer 5%
19%
<3Xnm share of wafer: 32% in 2013  61% in 2014
Bit Output (MGb)
M Gbits
13%
35.8 BGb
26%
45.1 BGb
2013 lower and 2014 higher due to lost supply from Wuxi fab fire
Supplier Share Ranking (Bit Output)
% industry
SEC MU
SKH
SEC MU
Capital Spending
MUSD
$4.6 B
$5.8 B
Increased share of growth capex vs. maintenance capex
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11/25/13

5. Change in Nature of Supplier Base in 2014
DRAM Bit Output by Supplier (Millions of Gbits)
Merger Transition
Recovery from Fire
Post-merger
Post-Fire
Pre-merger
Pre-Fire
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11/25/13

6. Wafer Capacity Transfers from NAND to DRAM
DRAM Wafer Outs by Supplier (Thousands)
Comparison of DRAM & NAND Flash Revenue per Wafer
MU transfers
to NAND
24%
SEC – transfer
from NAND
MU’s Elpida
acquisition
SKH more capacity
than pre-fire – transfer
from NAND
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11/25/13

7. Widening Productivity Gap across Suppliers
DRAM Productivity by Supplier (Gbits/Wafer)
Process Node Share of DRAM Industry Bit Output
Productivity gap
widens beyond Nov ‘13
3X nm
2X nm
2Y nm
4X nm
2Z nm
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11/25/13

8. Highlights of DRAM Demand in 2014
Mobile DRAM demand losing its prominence in DRAM portfolio
Saturating smartphone and table unit growth
Profit margins same or lower than DDR3
Premium has diminished in Q413
Server DRAM demand to outpace mobile DRAM demand growth
Driven by content growth – 16GB RDIMM
Bottoming of PC DRAM market
Healthy Graphic DRAM growth
Consumer and other DRAM demand: supplier base issues
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11/25/13

9. Demand Production Highlights
Forecast of DRAM Demand
Excess production of 2.6 BGb in – 6% over demand
Saturating and slow set unit growth
Profit margin pressures on sets – constrain DRAM content growth
Demand still has high level of uncertainty – market conditions sensitive to PC demand
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11/25/13

10. Bending Trend of Smartphone & Tablet Builds
Bending Trend of Smartphone Builds
Bending Trend of Tablet Builds
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11/25/13

11. Lower Mobile DRAM Growth in 1H 2014
Application Processor Builds – Millions of Units
Forecast Change from Sep to Oct 2013
Project a 38% growth of mobile DRAM demand in 2014 down from 43%
Server demand to outpace mobile DRAM demand in 2014
Stimulate DRAM content growth through price
4% below Sep forecast
9% above Q213
5% below Sep forecast
12% above Q113
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11/14/13

12. DDR3 Profits Matching/Exceeding LPDDR2
Comparison of DRAM Product Operating Margins
Supplier 1
Comparison of DRAM Product Operating Margins
Supplier 2
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11/14/13

13. Shrinking LPDDR2 Price Premium over DDR3
Comparative Trend of 8Gb LPDDR2 Price
And 8Gb Equivalent Price in 4GB SODIMM
Ratio of 8Gb LPDDR2 Price
to 8Gb EquiDDR3 Equivalent Price in 4GB SODIMM
8Gb LPDDR2 Price Range
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11/14/13

14. Weak Server and PC Unit Trends
Server Unit Shipment and ASP Trend
Trend of PC Unit Shipments and Builds 2%
growth
Falling ASP
and profit margins
Change
-3% Shipments
+6% Builds
Change
-10% Shipments
-14% Builds
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11/25/13

15. Price Interaction between PC and Server DRAMs
Comparison of 4Gb DDR3 prices
extracted from the 4GB SODIMM & 16GB RDIMM
4Gb in SODIMM currently more profitable than 4Gb in RDIMM
Suppliers will have to change their wafer allocation criteria from 2013 practice
Interactions across key DRAMs can limit upward or downward price movement
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11/14/13

16. Forecast of DRAM Market Conditions
ALL DRAM Market Conditions1
DDR3 DRAM Market Conditions1
1 – Does not include the effect of inventory at suppliers, channel, and OEMs.
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11/25/13

17. User Inventory Trends
OEM using bit inventory to augment tight supply and protect against high opportunistic prices
Weak demand keeping weeks of inventory low
Purchasing to maintain inventory
Channel resellers maintaining inventory by constraining supply flow and sales to their markets
Charging higher prices and profit margins
Avoiding high quotes from suppliers
ODMs bringing DRAM bits and weeks of inventory down because of weak demand – settle at levels needed for operations
Reducing purchases
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11/25/13

18. Trend of Supplier and User Inventory
Users accumulate
inventory
DDR3 inventory
pressure
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11/25/13

19. 4GB SODIMM Price Trend
4GB SODIMM Price Forecast
Price correction, not crash, by historical standards
Approx. 5% ASP drop, ‘13-’14
Less than cost drop  profit
Less than bit growth  revenue growth
Average cost of user inventory
Little effect of high Q413 prices
Trigger of user inventory release is around $28
Bottom price still profitable for suppliers
Weighted
Average
Return to
pre-fire prices
~20%
~30%
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11/25/13

20. 16GB RDIMM Price Trend 16GB 2Rx4 RDIMM Price Trend Price/GB Comparison
~14%
~20%
Breaks 3Xnm
fully loaded cost
4% ASP drop
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11/25/13

21. RDIMM Price Trends Some increases in 32GB RDIMM/LRDIMM price
16GB Equivalent Prices of Different RDIMMs
Some increases in 32GB RDIMM/LRDIMM price
Separation of prices of 2Gb and 4Gb based 8GB RDIMMs has started
Correlates with Ivy Bridge platform penetration
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11/25/13

22. DDR4 RDIMM Price Forecast
16GB DDR4 RDIMM Price Forecast
8GB DDR4 RDIMM Price Forecast
96%
premium
95%
premium
65%
60%
47%
40%
30%
21%
25%
17%
12-13%
Premium in 2015
18%
13%
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11/25/13

23. LPDDR2 and LPDDR3 Price Trends
4Gb LPDDR2 and LPDDR3 Price Trend
8Gb LPDDR2 and LPDDR3 Price Trend
2H14 price interaction raises several issues
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11/25/13

24. Changes in Relative Prices of the LPDDRx
8Gb LPDDR2 & LPDDR3 Price Trend v. 4x2Gb DDR3
Price premiums have narrowed
LPDDR parity in late Q214 LPDDR parity in Q114
Prices to settle with LPDDR3 about 10% higher than memory- down DDR3L and 15% higher than 4Gb DDR3 in PC DIMM
Competition starts between DDR4 and LPDDR4 for post-DDR3 PC memory
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11/25/13

25. Major Influences on DRAM Prices in 2014
User inventory and a price correction
Trigger point is price vs. average cost of user inventory
Convergence of the prices of key DRAM products
Changes wafer allocation criteria of suppliers next year
Interaction among prices – limits price movements
Elasticity (when prices affect volume)
Effective today in PC-DRAMs to OEMs and the channel
To be next tested in the server DRAM market
Financial motivation remains for some suppliers to raise prices
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11/25/13

26. Debt Burden & ROI Influences on Capex
Debt Service Coverage Ratio
Cumulative Return on Assets
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11/25/13

27. Trend of Capital Spending as % of Sales
Capital Spending as a Percent of Sales
Trend of Capital Intensity Ratio
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11/25/13

28. Conclusions and Recommendations
OEMs will respond to 2013 events with their own revised strategies
A price correction is expected and perhaps necessary
Difference in price conditions in 2014: Convergence of key DRAM prices and Elasticity Barriers
Capital spending to rise 25% or more DRAM investment attractiveness at least through 1H14
Another profitable year but market still has to learn its way towards more stable pricing
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11/25/13

29. PC-DIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
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11/25/13

30. DDR3 RDIMM Price Table
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11/25/13

31. DDR4 RDIMM Price Table
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11/25/13

32. LPDDR2 DRAM Price Table
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11/25/13

33. LPDDR3 Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
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11/25/13