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DRAM MARKET UPDATE January 2013

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Presentation on theme: "DRAM MARKET UPDATE January 2013"— Presentation transcript:

1 DRAM MARKET UPDATE January 2013
© 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

2 2013: Nonlinear Path to True Shortage
Not a technical shortage Manifestations of slow process transitions, low capex, and consolidation New supplier behavior and business model experiments DDR3 & PC-DRAM supply reductions Demand changes and uncertainties Supply changes – utilization, etc. Changes in relative profit margins OEM BOM cost impact Nonlinear Path Peaking 2Xnm production Wafer capacity constraints Improving demand Real DRAM Shortage © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

3 Sharp Reductions of DDR3 Production
DRAM Bit Production Constrained wafer outs and productivity Capacity departures Lower utilization Longer 2Xnm throughput and slow transition Allocation to mobile and server DRAMs Suppliers and channel holding inventory Lower production flow Anticipation of higher prices 4% 6% 0% Q/Q 2% Q/Q 4% -9% Q/Q -3% Q/Q -16% Q/Q -7% Q/Q 38% 11% 19% Q/Q 3% Q/Q © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

4 Measuring the 2Xnm Process Ramp Delay
DRAM Wafer Starts by Process (Thousands) 2Xnm delay, slower transition 4-months behind 3Xnm & 4Xnm (Jan 2013) 9 months behind by Dec 2013 Change of DRAM business model Lower bit growth Slower cost reductions Delayed roadmaps Priority allocations to mobile and server DRAMs Extension of 3Xnm support for PC DFAMs Feb 2013 estimate © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

5 Shifting Supplier Shares – PC & Server DRAMs
Supplier Share of PC-DRAM Production Supplier Share of Server-DRAM Production © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

6 Momentum Behind PC-DRAM Price Increase?
Upward Price Pressure Downward Price Pressure January 2013 Pre-CNY production, HP, Dell FQ end Low fab output in 1H Jan Weak server unit shipments February 2013 OEM opportunity to build reserve inventory Very weak PC builds – CNY March/April 2013 PC inventory correction and resulting strong PC builds 4Gb/2Gb crossover - May/Jun 2013 Output from higher utilization (Inotera, Rexchip) Slowing mobile DRAM growth? GB/PC adjustments © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

7 Weak PC Unit Builds & Inventory Correction
Trend of PC Unit Builds and Shipments Thousands of Units Est. NB/UB Builds by Leading PC Companies Millions of Units 27% drop Sep-Dec 1% increase Q312-Q412 (v. prev. -3%) 15% Q/Q 10% drop Q412-Q113 (v. prev. -6%) PC Inventory Correction End of March © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

8 Trend of Server Unit Demand
Server Unit Shipment Forecast Capital Spending of Largest Datacenter Cos. 4% growth ;11-’12 2% growth ;12-’13 -8% Q/Q Server ODM units 8% down from Q412 to Q113 after an 8% increase from Q412. Slower than in Q112 and Q111m about -3% Signs of slowing economies/recession – China, Germany, etc, Datacenter: still expect 21% increase in server units v. 0 to -1% for traditional applications Capex quarterlies are asto Capex growth rates slowed in 2012: 39% 2011, 18% % 2013est Coincides with slowdown in online and ad revenue – 40% % % 2013 Facebook still spending at a large percentage of revenue – planning for growth FCBK and AMZN showing stronger growth than GOOG or MSFT © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

9 Demand and Production Trends
Millions of Gbits Record low bit production growth of 17% in 2013 20-21% with faster utilization recovery De-emphasis of PC DRAM Trend towards inventory reduction in 2013 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

10 Trend of DRAM Production Components
DRAM Wafer Capacity & Utilization DRAM Wafer Productivity & Bit Output © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

11 Forecast of Demand & Supply Conditions
ALL DRAM Market Conditions PC DRAM Market Conditions © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

12 Factors that Can Change Market Trends
Probability Price pressure GB/PC Adjustments High for most Down Higher Capacity Utilization High for IMI, Rexchip Low for others Buy aheads and Inventory High Up near term, Down long term Conversion of DRAM fab to NAND Moderate to High Up Mobile Demand Downside Moderate GB/server upside © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

13 Utilization Effect on Market Conditions
Change in DRAM Demand-Production Ratio With Higher Capacity Utilization Change in PC-DRAM Demand-Production Ratio With Higher Capacity Utilization © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

14 Impact of Scenarios on PC-DRAM Market
GB/PC adjustments reduce PC OEM risk of short supply and © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

15 Growing Mobile DRAM Demand Risks
Decelerating Q/Q growth in Q213 and Q313 After strong 2H12 and stronger-than-seasonal Q113 Slower growth of low-cost smartphone market after Q113 Profit margin concerns Low cost smartphone retail prices plunging – no profit margins Profit margin loss at 3Xnm costs. Difficulty moving to 2Xnm Increasing concentration of smartphone shipments and coming saturation of smartphone unit demand Tablet growth from low-cost media tablets and from tablet PCs Same fate as smartphones? Memory content growth still strong © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

16 Trend of Smartphone Demand & Its Components
Smartphone Mobile DRAM Demand Components Millions of Sets and Megabyte per Set Smartphone Mobile DRAM Demand Millions of Gbits © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

17 4GB PC-DIMM Price and Profit Forecast
4GB PC-DIMM Price Forecast v. Cost 4GB PC-DIMM Operating & Cash Margin Ranges Cash Margins Operating Margins © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/9/13

18 Impact of DRAM Prices on PC OEMs
PC-DRAM Price/GB PC-DRAM GB/PC PC-DRAM Cost/PC & Share of BOM +31% UP ‘12-’13 49% up Q412-Q413 57% up Q412-Q413 5% up Q412-Q413 +14% UP ‘12-’13 +15% UP ‘12-’13 PC DRAM SPEND +30% UP ‘12-’13 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/9/13

19 PC-DIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/9/13

20 8GB 2Rx4 RDIMM Price Forecast
8GB 2Rx4 RDIMM Price Forecast v. Cost Operating Margin Ranges: 8GB 2R RDIMM v. 4GB SODIMM © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

21 Price Trend of Other RDIMM Densities
8GB Equivalent Prices of RDIMMs Operating Profit Margins: 16GB v. 32GB 32GB 4RX4 RDIMM 16GB 2RX4 RDIMM © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

22 Impact of DRAM Prices on Server OEMs
Server-DRAM Price/GB Server-DRAM GB/Server Server-DRAM Cost/Server & Share of BOM 9% UP ‘12-’13 7% up Q412-Q413 16% up Q412-Q413 24% up Q412-Q413 15% DOWN ‘12-’13 29% UP ‘12-’13 SERVER DRAM SPEND 15% UP ‘12-’13 © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

23 RDIMM Price Tables © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

24 4Gb LPDDR2 Price Trend and Forecast
Approx. 11% price reduction in Q113 – larger decreases in the low end of price range Low end prices experiencing profit margin challenges with 3Xnm costs Current price reduction trend can bring 4Gb LPDDR2 profit margins below PC-DRAM Forecast assumes LPDDR2 competes with profit margin of 4GB SODIMM AVERAGE PRICE PRICE RANGE MANUFACTURING COST RANGE © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

25 Impact of 4Gb LPDDR2 Price on Suppliers
Operating Margins of 4Gb LPDDR2 & 4GB SODIMM Operating Margins of 4Gb LPDDR2 & 8GB 2Rx4 RDIMM 4Gb LPDDR2 4Gb LPDDR2 8GB 2Rx4 RDIMM 4GB SODIMM © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

26 Estimated Impact on Smartphone OEM Cost
Impact of LPDDR2 Cost on Smartphones Slower price takedown and increase not disruptive to smartphone product cost Our analysis shows that LPDDR2 prices will not disrupt product costs of the popular Galaxy SIII and iPhone 5 Integrated Baseband & Application Processor IC 3.5” WXGA Display Module Assumes all else the same from Q412 cost. © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

27 LPDDR2 DRAM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

28 Conclusions Near term price increase momentum through April
Depends on OEM choices made in Feb - very weak PC DRAM demand Nonlinear path to real shortage in late 2013 Fundamental supply issues may lead to real shortage by Q413: Slower process transitions and reduced wafer capacity Supply and demand uncertainties between May and August will challenge the path to that shortage Changes in production mix as relative profit margins shift Mobile DRAM profit issues emerging for some suppliers DRAM companies forced to experiment on business model changes by slower and more complex processes Procurement side must do the same © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1/17/13

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