1. August 2012
8/29/12
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2. Weak Global Economy’s Impact on DRAMs
Global IT spending – downward revisions
Enterprise equipment – longer approval and shipment cycles
Telecom carriers – flat to lower capital spending
PC unit shipments drop 7% Q2/Q1 2012
Global unemployment – 200 million out of jobs (WLO)
Weak US/Europe – 50% of global consumption
Bright spots
Datacenters – 20% global digital-ad spending growth in ’12
Smartphones & tablets – replacing the old
What about 2013?
8/29/12
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3. The Semiconductor Industry Feels the Pain
Rising inventory levels
Intel - inventory up 22%
Memory inventory up – DRAM & NAND
Fabless semiconductor companies – TSMC seeing a buildup of inventory
IC supply corrections in Q1 2013
HDD controller supply down 21% Q/Q
FPGAs down 14% Q/Q
WLAN IC down 7%
Application processors down 9%
Semiconductor equipment companies - order push-outs and lower orders
8/29/12
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4. Forecast of DRAM Market Conditions
Slower 2Xnm transition, 30nm ramp. Falling PC-DRAM bit output
Improving 2Xnm yields but limited wafers. Chance of utilization reductions (not reflected)
Utilization increases
Slower 2Ynm transition. Falling PC-DRAM bit output.
Weaker-than-expected PC demand & delayed Apple demand
Overflow of mobile demand to Q113 but seasonally weak markets.
CHANGE THIS SLIDE
Stronger box builds: Sep – Nov but year-end build corrections
Seasonal improvement of demand. Win 8 traction. Low-cost smartphone/tablet volumes.
Buy-Ahead Activity
Buy-Ahead Inventory Takedown
8/29/12
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5. 2013 DRAM Demand Assumptions
System Unit Growth
2013 Memory Content/Growth
Other Factors
PC DRAM
371M PCs
4% growth
4.8 GB
15% growth
Ultrabook: 22% of Mobile PCs Inhibiting GB/PC growth
Low BOM impact
Server DRAM
11M Servers
11% growth
63.5 GB
43% growth
Content-driven growth:
Romley & 16GB/8GB crossover
Strong datacenter demand
CPU vs. DRAM in BOM
32GB activity
Mobile DRAM
1217M smartphones
34% growth
823MB
Increasing low cost smartphones
“Good enough” low cost phones
Shrinking BOM w/ low phone ASP
172M tablets
42% growth
888MB
1% growth
Volume shift to <8” tablets
Increasing OS competition leading to excess builds
Shrinking BOM – lower tablet ASP
8/29/12
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6. Slowing Process Transitions
4X nm
250 wafer increase per quarter
– 1st 7 quarters
7 QTRS TO PEAK
3X nm
232 wafer increase per quarter
– 1st 7 quarters
8 QTRS TO PEAK
2X nm
113 wafer increase per quarter, est.
– 1st 7 quarters
12 QTRS TO PEAK est.
8/29/12
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7. How Much Cash Left for Faster 2X/2Ynm Ramp?
Estimated Cash Generation and Use in 2012
Sources of External Cash:
Samsung (Debt and Internal)
SK Hynix (SK)
Elpida (Micron)
Micron (Debt and Stock)
Nanya (Formosa Plastics)
8/29/12
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8. PC Builds Determine PC-DRAM Prices
Notebook-PC Production by Major PC Company
Millions of Units
PC unit shipments dropped 7% from Q112 to Q212
PC builds up 10% from Q312 to Q412 because of Sep/Oct builds
Recovery to pre-HDD- shortage build levels by Q412
No boost from ultrabooks or Windows 8
Weak May builds trigger DRAM price declines
Windows 8 builds in Sep/Oct
Year-end takedown
Q312 builds up only 2% to correct channel inventory
tegra
8/29/12
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9. PC Memory Content Trend
Memory content growing well since 2H 2011
Mobile PCs in emerging markets
Lower than historical rates (CMGR 1/11-12/12)
1.9% CMGR for mobile
1.2% for desktop
OEM slowing content growth in 2H 2012
Increase profit margins as PC units slow
2013 growth based on granularity
Mobile PC: 4.3 GB ‘12 average
Desktop PC: 3.8GB ‘12 average
All PC: 4.1 GB ‘12 average
8/29/12
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10. Ultrabook Penetration & Memory Content
Mobile PC Units by Type – July 2012
DRAM Content by Mobile-PC Type – July 2012
8/29/12
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11. The Ultrabook/Air Differentiation
Product Weight by Mobile-PC Type – July 2012
Ultrabook Storage GB by Type – July 2012
SSD: 58% of UB & 5% of Mobile PCs
8/29/12
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12. PC-DRAM Market Conditions, 2012-2013
20% PC-DRAM bit demand growth in 2013
Expect more PC-DRAM supply reductions in 2H
Micron to control a large share of PC-DRAM supply
Challenge is weathering 1H 2013 price pressures
Production adjustments to prevent inventory growth?
OEM Buy Aheads
8/29/12
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13. 4GB PC-DIMM Price Forecast through 2013
DRAM companies will try to prevent a deep 1H13 price drop
DRAM companies will try to raise 2H13 prices to achieve operating margins
8/29/12
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14. Financial Impact of PC-DRAM Prices
Range of 4GB PC-DIMM Cash & Operating Margins
4GB PC-DIMM Operating Margins by Supplier
8/29/12
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15. Server-DRAM Market
Server units challenged by weaker global IT spending and longer approval cycles
Cloud, virtualization, and video driving GB content growth
Westmere content growth peaking in Q3 2012
Romley content growth to pick up in Q4 2012
DRAM suppliers to push 16GB & 32GB in Q412/Q113
Datacenter activity still strong – 18% increase in digital ad spending in 2012
8GB prices facing loss of operating margins
Proliferation of server-DRAM products
8/29/12
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16. Trend of Server DRAM Demand
Trend of Server Units & DRAM Content
Trend of Server DRAM Demand
Moving to Mainstream 16GB
Romley
Content Growth
8GB mainstream
59% bit demand growth in 2013
Westmere
Content Growth
50% bit demand growth in 2012
61% bit demand growth in 2011
8/29/12
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17. 8GB RDIMM Price Forecast
8GB RDIMM Operating Margin Range
Average Price
Avoiding lower
PC-DRAM Prices
Tighter
PC-DRAM Supply
Manufacturing Cost Range
2Xnm Penetration
8/29/12
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18. 8GB & 16GB RDIMM Operating Margin Ranges
RDIMM Price Forecast
8GB & 16GB RDIMM Operating Margin Ranges
16GB RDIMM OPERATING MARGINS
8GB RDIMM OPERATING MARGINS
16GB/8GB
Price/Byte Crossover
8/29/12
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19. Mobile DRAM Market
Smartphones have another years of strong growth
Risks in mobile DRAMs
Consolidation of mainstream smartphone market
Competition from “good enough” low-cost handsets
Carrier capex and changing handset policies
Low-cost tablets, volumes from <8” displays with lower DRAM content
Shrinking margins, shrinking BOMs
Is Apple peaking?
Shift to low-cost iPhones and iPads with lower margins
8/29/12
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20. Updated Mobile DRAM Demand in Smartphones
8/29/12
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21. Updated Mobile DRAM Demand in Tablets
8/29/12
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22. Memory Content Analysis
2012 Est. Smartphone Memory Content
(Megabytes per Phone)
2012 Est. Tablet Memory Content
(Megabytes per Tablet)
892
Average
611
Average
8/29/12
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23. Content Trends and Shifting Demand Mix
Memory Content Trend
Smartphones and Tablets
Distribution of Smartphone Mobile-DRAM Demand
13%
Share
Low cost
Phones
42%
Share
Other
Mainstream
Brands
45%
Share
Samsung/
Apple
2058
8/29/12
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24. Forecast of Mobile DRAM Prices
EST. AVERAGE
PRICE
EST. AVERAGE
PRICE
PRICE RANGE
PRICE RANGE
MANUFACTURING COST RANGE
MANUFACTURING COST RANGE
8/29/12
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25. Conclusions and Recommendations
Is the DRAM business no longer attractive?
DRAM demand profiles will change.
PC can revive but not as before.
Mobile DRAM faces long term challenges
Resilient server DRAM demand
The DRAM industry must change its business models in the face of slowing demand growth
Relative profit margin method for pricing
Capital spending discipline and ROI management
More industry consolidation in 2013
Supply shortage in late 2013 and at least 1H 2014 as DDR4 server-DRAM market develops
8/29/12
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26. Appendix
8/29/12
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27. PC-DIMM Price Forecast
8/29/12
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28. RDIMM Price Forecast
8/29/12
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29. LPDDR2 Price Forecast
8/29/12
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