1. DRAM MARKET UPDATE November 2012
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11/27/12

2. A G E N D A DRAM Demand Developments
Opportunities for PC-DRAM price rebound
Constraints on server memory content growth
Stronger mobile-DRAM demand
Ultrabook, GPU attach rates, and GFX memory content
Production Trends Affecting DRAM prices in 2013
Low bit growth
DDR3 & PC-DRAM production constraints
Migration from 2Gb to 4Gb DDR3
Price Forecast
Timing of Full Effect of Industry Consolidation
© 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
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11/27/12

3. Pessimism in PC Market Continues
Mobile PC Unit Builds of Leading PC OEMs
Millions of Units
Falling PC unit builds to correct inventory and adjust to new demand reality
Build reductions weakening DRAM demand
Inventory buildup at PC-OEMs not just channel
PC inventory makes DRAM demand worse
35%
drop
31%
drop
26% drop
previously
Deeper fall of Sep-Dec builds: from 26% to 31%
Poor Q113 builds reflect seasonality and weak demand
3 consecutive quarters of build reductions
-7%
Q3/Q2
-3%
Q4/Q3
-6%
Q1/Q4
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11/27/12

4. PC Component Build Adjustments
HDD Unit Production
Millions of Units
GPU Unit Production
Millions of Units
AMD MPU Unit Production
Millions of Units
LCD Driver IC Unit Production
Millions of Units
17% below Sep Q213 plan
5% drop, Q412-Q213
25% below Sep Q113 plan
28% drop, Q412-Q113
31% below Sep Q113 plan
52% drop, Q412-Q113
27% below Sep Q213 plan
38% drop, Q412-Q213
Correct inventory and Adjust to New Demand Reality
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11/27/12

5. PC-OEM Inventory Correction Process
Estimated PC-OEM Inventory Trend
JAPAN EARTHQUAKE/TSUNAMI
HDD SHORTAGE
DEMAND-DRIVEN BUILD REDUCTIONS
INVENTORY CORRECTION.
INCREASE PC UNIT BUILDS TO MAINTAIN LOW INVENTORY
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11/27/12

6. Trend of PC Unit Builds & Shipments
Trend of PC Unit Builds and Shipments
Thousands of Units
362 M Units
Shipped
354 MUnits
353 MUnits
RETURN TO CLOSER BUILD & SHIPMENT SYNCHRONIZATION
REPLENISH PC-OEM INVENTORY IN Q213.
REQUIRES 13% Q/Q INCREASE OF PC UNIT BUILDS DEPENDING ON DEMAND
-1.4% CHANGE OF BUILDS: 2H12  1H13
Shipments: -2.8%
Builds: -8.8%
Shipments: +0.3%
Builds: +3.1%
© 2012 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
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11/27/12

7. Trend of PC Unit Builds & Shipments
Trend of PC Unit Builds and Shipments
Thousands of Units
362 M Units
Shipped
354 MUnits
353 MUnits
RETURN TO CLOSER BUILD & SHIPMENT SYNCHRONIZATION
REPLENISH PC-OEM INVENTORY IN Q213.
REQUIRES 13% Q/Q INCREASE OF PC UNIT BUILDS DEPENDING ON DEMAND
-1.4% CHANGE OF BUILDS: 2H12  1H13
Shipments: -2.8%
Builds: -8.8%
Shipments: +0.3%
Builds: +3.1%
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11/27/12

8. PC DRAM Buying Environment
Upward Q/Q trend in 2013
Probable positive PC ASP growth with Ultrabook
Probably similar to PC revenue growth
15 pts. Above 4% DDR3 output growth
AVERAGE COST/GB
AVERAGE GB/PC
AVERAGE DRAM COST/PC
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11/27/12

9. Server DRAM Demand Trends
Trend of Server DRAM Demand Components
Seasonal improvement of server unit demand in Q412
3% up in 2012
6% up in 2013
To maintain DRAM cost per server, GB/server increase of 29% from 2012 to 2013
37-38% Gb demand growth,
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11/27/12

10. Server DRAM Buying Environment
AVERAGE COST/GB
AVERAGE GB/SERVER NODE
AVERAGE DRAM COST/SERVER
Compared to -3 to -4% server ASP change
Compared to 2% est. server revenue growth
33 pts. Above 4% DDR3 output growth
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11/27/12

11. Another Boost of Mobile DRAM Demand
Combined Components of Smartphone and Tablet
Mobile DRAM Bit Demand
Mobile DRAM Bit Demand
From Smartphones and Tablets
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11/27/12

12. Demand Components of Smartphone & Tablets
Components of Smartphone Mobile DRAM Demand
Millions of Smartphone Units
Components of Tablet Mobile DRAM Demand
Millions of Tablet Units
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11/27/12

13. Stronger GPU Attach Rates in 2012 ...
GPU Attach Rates in Mobile PCs
GPU Attach Rates in PCs
Strong GPU attach rates in 2012 especially from mobile PCs.
Mobile PC attach rates showing recent signs of decline.
Desktop PC attach rates showing signs of improvement.
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11/27/12

14. ... But Ultrabooks with Lower Attach Rates
Mobile PC GPU Attach Rates
Major Brand, Emerging Markets
Mobile PC GPU Attach Rates
Regional & White Box Brands
Mobile PC GPU Attach Rates
Major Brand, Developed Markets
Ultrabook
Ultrabook
Ultrabook
Notebook
Notebook
Notebook
Potential GPU attach rate decline with penetration of Ultrabooks with lower GPU usage
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11/27/12

15. Linear Trend of PC Graphic Memory Content
Average DRAM Content in PCs with External GPUs
Mbytes per PC
Forecast of Average DRAM Content in PCs w/ GPU
Mbytes per PC
1417 MB
Dec ‘13
1209 MB
Oct ‘12
Linear trend, R^2=0.97
FORECAST
OCTOBER 2012:
1170 Graphic MB per Desktop with Ext. GPU
1230 Graphic MB per Notebook with Ext. GPU
1209 Graphic MB for all PCs with Ext. GPU
9% MB/PC change
31% MB/PC change
48% MB/PC change
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11/27/12

16. Graphic Memory Buying Environment
Components of
Graphic Memory Buying Environment
Mobile PC GPU Attach Rates
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11/27/12

17. Bit Output & Changing Supplier Attitudes
DRAM Bit Production and Q/Q Change
17% bit output growth from 2012 to 2013
10% wafer-out reduction
27% productivity growth
Top 3 suppliers’ share up from 88% in ‘12 to 96% in ‘13 with new Micron
Output up 26%, ‘12-’13
Other suppliers’ share down from 12% in ‘12 to 4% in ‘13
Output down 64%
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11/27/12

18. Wafer Reductions: Consolidation & Utilization
DRAM WAFER CAPACITY UTILIZATION (Starts)
Rexchip headed for default of ~90 MUSD debt by Nov 20
FPG still supporting Inotera capex for migration to 30nm
Powerchip selling P3 commodity-DRAM fab to China.
Japanese court approves Micron’s acquisition of Elpida
Next consolidation step: scale-down of Micron’s new DRAM capacity
Kingston plans
U-shaped
V-shaped
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11/27/12

19. Changing DRAM Production Mix
DDR3 and LPDDRx Production Trends
Millions of Gbits
Low DDR3 output growth in 2013
4% ’12-’13 growth v. 78% for LPDDRx
Flat to down Q/Q trend
Server DRAM v. PC-DRAM allocations
4Gb crosses over 2Gb in Q113
Impact in Q412 with 2-qtr decrease of 2Gb output
Firm and eventual rise of 2Gb-based module prices
4Gb-based modules as mainstream
4Gb granularity effect on content
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11/27/12

20. Falling PC-DRAM Production Share
All DRAM Production by Product Group
Year/Year Change
Quarterly Trend
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11/27/12

21. Supply Will Have an Impact on Market
DRAM Demand & Production Trend
DRAM Supplier Inventory Trend
AFFECTS SERVER & MOBILE
DRAM PRICES
AFFECTS PC-DRAM
PRICES
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11/27/12

22. Risks of Changing Market Conditions
Seasonality of the PC-DRAM Price,
Index of the Lowest PC-DRAM Price (Base = Jan)
New seasonality of PC-DRAM prices
2H13 price has downside risks
Higher capacity utilization with higher prices
Bit growth can be up 20+% in Q213 or Q313
Inventory liquidation with higher prices
1 week inventory move increases supply 8% above production
Downside risks of global economy
Wrong smartphone and tablet forecasts
Geopolitical risks: Middle East
Lose-to-recover cash cycle:
Sep 2011 – Mar 2012
Oct 2012 – Apr 2013 forecast
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11/27/12

23. PC DRAM Price Outlook Forecast of 4GB SODIMM Price to OEMs USD
OCT 2012
Samsung below mfg. cost,
Micron below cash cost
DEC 2012 – JAN 2013
Price bottom
Attempt to raise prices
OEMs still taking down inventory
MAR-APRIL 2013
New PC build ramp (Mar- Apr)
Faster price increase to break cash cost
OEMs near end of inventory correction
2H 2013
Balanced demand & production
PRICE INCREASE STILL AT RISK
- Utilization increase
- Takedown of supplier inventory
- Buy ahead
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11/27/12

24. RDIMM Price Outlook 8GB 2Rx4 RDIMM Price Trend
Against Manufacturing Cost Range
8GB Equivalent Price of Different RDIMMs
Stimulate more
32GB demand
Decreasing 2Gb
production
Drive 16GB
crossover
Position
4Gb-based 8GB 4%
10%
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11/27/12

25. Profit Margin Influence on Price Trends
Comparison of Gross Margins
Competition for high-margin server DRAM share will continue thru Q313
Profit motivation to migrate to 16GB RDIMM
No profit motivation to increase 16GB RDIMM price in 2013
Potential pressure to increase server-DRAM prices in Q413 if PC-DRAM prices hit forecast
Attempts to bring 8GB 2Rx4 price to profit parity with 16GB
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11/27/12

26. LPDDR2 Price Outlook 4Gb LPDDR2 Price Trend 8Gb LPDDR2 Price Trend
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11/27/12

27. Estimated DRAM Operating Cash Flow
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11/27/12

28. Conclusions Production and demand trends suggest a price recovery
Record low bit output growth of 17%
Trigger for 4GB SOD and 8GB 2Rx4 RD prices – Mar/Apr PC build hike
Premiums for 2GB SOD, 2Gb-based and 4Gb-based 8GB RD
There are still downside risks in this scenario
Utilization, DRAM inventory, global economy, PC channel inventory
OEM conservatism in content growth due to continuity of supply concerns: PC, Server, etc.
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11/27/12