Transcript DRAM MARKET UPDATE

March 2013
DRAM MARKET UPDATE
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
© 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission.
1
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
PC Market Conditions
 PC-DRAM March price increases are too steep and can upset the
market balance.
- Negative channel profit margins and demand elasticity can lead to
lower spot prices
- Buy ahead demand activity will slow
- PC OEM profit margins at risk
 Evaluating the risks of a 2H seasonal downturn of PC-DRAM prices
- Importance of perceptions of demand and price momentum
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2
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Market Developments
 Revised 2013 bit production growth from 17% to 13-15%
- Longer 2Xnm throughput reduces effective wafer capacity
- 2Xnm ramp plateaus in Feb/Mar
 Revised demand growth for PCs and servers downward
- Reduced PC-DRAM bit demand growth from 12% to 6-8% due to
weaker Q213 PC builds
- Reduced server-DRAM bit demand growth from 27% to 23% due to
delay in Ivy Bridge platform release
 Mobile DRAM production crosses over PC-DRAM by mid-year
- Mobile DRAM 2013 share: 34%, PC-DRAM share: 36%
 Higher prices and capital spending can change trend
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3
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Spot Price Increases & DRAM Channel Margins
Profit Margin through Channel
$35
120%
Channel Cost
Median Resale Price
$30
100%
$25
80%
$20
60%
CHANNEL PROFIT MARGIN
4GB SODIMM CHANNEL END-USER PRICE
Branded Module Cost, Resale & Profit Margin
in DRAM Channel (Run Rate Basis)
 Spot price (channel cost) up
105% from Nov bottom to Mar
18
 Run-rate profit margin down
to -2% as of Mar 15 vs. recent
high of 23% in Feb
 Resale Price up 45% since
$15
40%
$10
20%
$5
0%
$-
-20%
1 7 13192329 5 11172127 2 8 14182430 5 11152127 5 1115
Nov
Dec
Jan
2012
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Reproduction prohibited without prior permission.
Feb
early Jan to compensate for
higher cost
 Channel must return quickly
to profit margin –
combination of higher resale
and lower cost
 How inelastic is demand
through channel?
Mar
2013
4
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Scenario of Return to Positive Channel Margins
$35
Profit Margin through Channel
120%
Channel Cost
$30
Median Resale Price
100%
$25
80%
$20
60%
CHANNEL PROFIT MARGIN
4GB SODIMM CHANNEL END-USER PRICE
DRAM Channel Resale & Spot Price Trend
To Return to Reasonable Profit Margins
0.8% increase or 23 cents per day
Reach resale price of $31.90
10% up from Mar 18 by Apr 3
Last reached in Aug ’11 (42% margin)
33 cents per day increase since low margins
0.8% increase or 18 cents per day
 Spot price can drop 10%-15% to
$15
40%
23%
23%
$10
20%
$5
0%
$2.80-$3.00 (4Gb) just above
current equiv. 4GB SODIMM
OEM price
 Further spot price hikes raise risk
of margin squeeze and elasticity
$-
-20%
1 4 9 14 17 22 25 30 4 7 12 15 20 25 28 5 8 13 18 21 26 29 3
Jan
Feb
Mar
 Channel prices can cap rate of
PC-DRAM price increase in Q213
Apr
2013
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5
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
© 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission.
MARGIN RISK
ELASTICITY RISK
Scenarios and Risks
6
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
PC-DRAM OEM vs. Spot Price Trends
Trend of OEM and Channel Spot Price
$26.00
$24.65
$24.35
$23.40
 OEM and spot price hit
relative parity since steep
spot-price increase
 Deviation in March –
Spot price > OEM price
 Correction of spot price
might cap OEM price
increase in April
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Reproduction prohibited without prior permission.
7
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Will 2013 Price Trend Break 3-Year Seasonality?
Index of PC-DRAM Price/GB (Base = Jan)
2010
2011
2012
 Current DRAM supplier concerns
2013
 First, will prices drop by mid-year as
175
in past 3 years?
150
- Market inventory, weak demand
125
 If not, will capital spending increase
100
75
and boost 2Xnm ramp and bit
production growth?
50
- How much capex and how soon will
be effect?
25
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Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Powerchip, Inotera, and Micron
Jan
0
- 2Xnm ramps: faster Hynix, Elpida,
8
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Updated Forecast of DRAM Market Conditions
PC DRAM Demand & Production Trend
10,000
1.30
8,000
1.20
1.06
6,000
4,000
2,000
1.00
0.99
0.89
0.96
0.90
0.84
0.89
-
0.80
Q1
Q2
Q3
Q4
Q1
Q2
2012
PRODUCTION
Q3
Q4
2013
DEMAND
1.80
Inventory release
4,000
1.60
3,000
1.40
1.21
2,000
1.10
1.02
0.99
MILLIONS OF GBITS
Potential D-P Ratio Downward Revision:
Weaker Demand, Stronger Production
5,000
1.40
DEMAND-PRODUCTION RATIO
MILLIONS OF GBITS
12,000
1.20
1.06
0.97
1,000
1.00
0.98
0.91
0.78
0.80
0.78
0.71
(1,000)
Q1
Q2
0.60
Q3
Q4
Q1
Q2
2012
PRODUCTION
D-P RATIO
Q3
Q4
2013
DEMAND
DEMAND-PRODUCTION RATIO
ALL DRAM Demand & Production Trend
D-P RATIO
Does not include Inventory and Buy Ahead Activity
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9
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Scenario 1: Estimated DRAM Inventory
6.0
3.3
1.3
2.3
2.5
2.4
2.4
1.0
4
3,000
12
1,000
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
Q3
Q4
Ending Bit Inventory
2013
5.2
Q2
2012
Q4
8
4
Q1
-
6.0
6.0
2,000
5.2
6.5
8
4.5
2.1
500
3.7
5.8
6.1
7.4
1,000
16
7.3
Buy Ahead
4,000
7.2
Inventory
release 12
20
4.1
16
Maintain
1,500
5,000
3.1
Ending Bit Inventory
EST. SUPPLIER INVENTORY, MILLIONS OF GBITS
20
WEEKS OF MARKET INVENTORY
Weeks of DRAM Inventory
2.9
EST. MARKET INVENTORY, MILLIONS OF GBITS
Weeks of PC-DRAM Inventory
2,000
WEEKS OF SUPPLIER INVENTORY
Est. PC DRAM Market Inventory Trend, 2012-2013
Est. PC DRAM Supplier Inventory Trend, 2012-2013
Q1
Q2
Q3
Q4
2013
Weeks of Inventory
OEMs + DRAM Channel
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Reproduction prohibited without prior permission.
10
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Scenario 1: DRAM Market Conditions
PC DRAM Market Conditions
With Buy Ahead and Inventory Considerations
10,000
2.50
Market
Inventory
2.00
release
8,000
Buy
Ahead Supplier
Inventory
release
6,000
1.50
0.97
1.00
4,000
0.89 0.84
2,000
Q1
Q2
0.74
Q3
0.80 0.81 0.85
0.94
2012
Q1
Q2
Q3
SUPPLY
Bit Shipments
1.5
1.0
0.93
0.62
0.78
0.55
0.83
0.62
0.70
0.68
-
0.5
Q1
Q2
Q3
2012
PRODUCTION
SUPPLY
DEMAND-SUPPLY RATIO
DEMAND-SUPPLY RATIO
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Reproduction prohibited without prior permission.
4,000
1,000
2013
DEMAND
5,000
2,000
Q4
PRODUCTION
2.0
3,000
0.50
Q4
6,000
11
Q4
Q1
Q2
Q3
DEMAND-SHIPMENT RATIO
3.00
MILLIONS OF GBITS
12,000
DEMAND-SUPPLY RATIO
MILLIONS OF GBITS
ALL DRAM Market Conditions
With Buy Ahead and Inventory Considerations
Q4
2013
DEMAND
SHIPMENTS
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Scenario 2: DRAM Market Conditions
PC DRAM Market Conditions
With Buy Ahead and Inventory Considerations
10,000
2.50
8,000
2.00
Buy
Ahead
6,000
Market
Inventory
release
0.92
4,000
0.89 0.84
2,000
Q1
Q2
0.74
Q3
1.50
1.00
0.80 0.81 0.85 0.84
2012
Q1
Q2
Q3
SUPPLY
Bit Shipments
1.5
1.0
0.62
0.78
0.55
0.68 0.65
Q1
Q2
Q3
2012
PRODUCTION
SUPPLY
DEMAND-SUPPLY RATIO
12
0.80
0.62
0.70
DEMAND-SUPPLY RATIO
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Reproduction prohibited without prior permission.
4,000
1,000
2013
DEMAND
5,000
2,000
Q4
PRODUCTION
2.0
3,000
0.50
Q4
6,000
Q4
Q1
Q2
Q3
0.5
DEMAND-SHIPMENT RATIO
3.00
MILLIONS OF GBITS
12,000
DEMAND-SUPPLY RATIO
MILLIONS OF GBITS
ALL DRAM Market Conditions
With Buy Ahead and Inventory Considerations
Q4
2013
DEMAND
SHIPMENTS
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Scenario 2: Estimated DRAM Inventory
Q2
Q3
Q4
2012
Q1
Q2
Q3
2.7
2.5
Q1
Weeks of Inventory
WEEKS OF MARKET INVENTORY
6.1
5.9
2.4
-
2013
Ending Bit Inventory
2.4
Q4
4
1.0
0.4
Q1
500
8
1.1
-
1,000
1.0
4
12
4.5
6.0
8
4.1
7.0
Inventory
release
2.1
1,000
6.0
2,000
6.0
7.3
7.2
Buy Ahead
16
1,500
7.4
12
20
Ending Bit Inventory
3.7
3,000
Weeks of DRAM Inventory
5.8
16
2,000
2.9
4,000
Weeks of PC-DRAM Inventory
EST. MARKET INVENTORY, MILLIONS OF GBITS
20
Est. PC DRAM Supplier Inventory Trend, 2012-2013
WEEKS OF SUPPLIER INVENTORY
5,000
3.1
EST. SUPPLIER INVENTORY, MILLIONS OF GBITS
Est. PC DRAM Market Inventory Trend, 2012-2013
Q2
Q3
2012
Q4
Q1
Q2
Q3
Q4
2013
OEMs + DRAM Channel
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13
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Forecast of 4GB SODIMM Price – Scenario 1
Forecast of 4GB SODIMM Operating & Cash Margins
120%
RANGE OF CASH & OPERATING MARGINS
$40
$20
28.70
15.79
18.97
23.39
$30
25.84
PRICE
RANGE
21.54
4GB PC-DIMM OEM PRICE (USD)
Forecast of 4GB SODIMM Price, US$
MANUFACTURING
COST RANGE
80%
Boost Capex
40%
CASH MARGIN
25%-35%
Q413
10%-27%
Q213
0%
OPERATING MARGIN
-40%
-80%
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14
Q413
Q313
Q213
Q113
Q412
2013
Q312
2012
Q212
2011
-120%
Q112
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11
Q411
$10
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Impact of PC-DRAM Price Forecast
28.60
15%
8,818
8,003
6,050
5.3%
5.0%
Q3
4.8%
Q2
10%
3.9%
Q1
3.4%
3.2%
Q4
3.8%
3.2%
$10
4.1%
5.5%
5.0%
$20
2.9%
15.56
20.81
$30
20%
DRAM SHARE OF PC BOM COST
PC-DRAM Spend, Millions of USD
$40
26.47
DRAM COST PER PC
Average DRAM Cost/PC and its % of PC BOM
5%
$0
0%
Q1
Q2
Q3
2011
DRAM Cost per PC
Q4
2012
Q1
Q2
Q3
Q4
2013
2012
2012
2013
DRAM Share of BOM Cost
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15
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
PC-DRAM Price Tables
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16
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
DRAM Industry Financial Trends
DRAM Operating Profit, 2006-2013
DRAM Revenue and Capital Spending, 2004-2013
BILLIONS OF US$
15,000
Millions of US$
2013 is a forecast.
10,000
3,877
DRAM REVENUE
DRAM CAPITAL SPENDING
40
30
21.1
5,000
50
-
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17
2009
2008
2007
2006
-
2006 2007 2008 2009 2010 2011 2012 2013
2005
(10,000)
2004
22%.
22%.
19%. 19%.
6.8
42%.
20%
2013
4.9
58%.
44%
of Revenue.
2012
10
2011
(3,192)
8.6
(2,829)
67%.
49%.
2010
(5,000)
20
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Major Server DRAM Developments
 Revised server DRAM demand growth down to 23%
- Delayed and slow releases of Ivy Bridge platforms
 DRAM demand at parity w/ production in Q213 and above
production in 2H13
- Server DRAMs feed off the production line, not inventory
- Compete with profit margins of PC & mobile DRAMs
 Short term 4Gb supply issues due to mobile and GDDR5 demand
 8GB and 16GB RDIMM prices likely to be higher than previous
forecast to compete against PC and mobile allocations
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18
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
8GB 2Rx4 RDIMM Prices – Scenario 1
Forecast of 2Gb-based 8GB RDIMM Prices
Operating Margins: 8GB 2R RDIMM v. 4GB SODIMM
$175
4GB SODIMM
8GB 2Rx4 RDIMM
80%
Manufacturing Cost Range
$150
60%
8GB RDIMM OEM PRICE
40%
$125
20%
42.25
$50
0%
68.00
62.75
$75
55.25
$100
-20%
-40%
-60%
$25
-80%
$-
Q3
1 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 91011121 2 3 4 5 6 7 8 9101112
2011
2012
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Q4
2011
2013
19
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
Q4
2013
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
16GB & 32GB RDIMM Prices – Scenario 1
Forecast of 16GB RDIMM Prices vs. other RDIMMs
16 GBYTE RDIMM EQUIVALENT PRICE (USD)
$300
Operating Margins: 8GB 2R RDIMM v. 16GB RDIMM
8GB 2Rx4 RDIMM
32GB 4Rx4 RDIMM/ LRDIMM
183
178
16GB 2Rx4 RDIMM
60%
8GB DDR3 1Rx4/2Rx8 RDIMM
$200
8GB 2Rx4 RDIMM
80%
16GB 2Rx4 RDIMM
40%
174
20%
0%
-20%
$100
107
107
107
-40%
-60%
-80%
$0
10 11 12 1
2012
2
3
4
5
6
7
8
Q3
9 10 11 12
2011
2013
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Q4
20
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
Q4
2013
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
The Premium for Performance & Chipkill
Premium for System Memory Bandwidth & Chipkill
80.00
Comparison of Supplier Operating Margins
60%
8GB 1Rx4/2Rx8
8GB 2Rx4
70.00
2Rx4 Premium
40%
30.00
9%
7%
5%
21%
18%
18%
17%
14%
40.00
10%
50.00
19%
60.00
20%
0%
20.00
8GB 1Rx4/2Rx8
-5%
-20%
8GB 2Rx4
-14%
-16%
-12%
-
-11%
10.00
-40%
10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2012
Q4
2013
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2012
21
Q1
Q2
Q3
Q4
2013
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
RDIMM Price Tables
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22
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Mobile DRAM Market Developments
 Strong smartphone DRAM demand but growth rate slowing in 2H 2013
-
Inventory correction of low-cost China smartphones
 Tablet memory core shifting to <$200 7-8” display products
-
Branded and MID price competition
-
Issues adding HW features in low cost, low form-factor product
-
Positioning of the PC tablet and the 9-10” media tablets
 Expect wide range of LPDDR3 prices because of pervasive use in high -end and
low-end of smartphone market
 More aggressive LPDDR3 prices in mid-range tablets in 2014
-
Slowing mobile-DRAM demand growth: 42% from ‘13-’14
-
Excess overall DRAM supply environment in 1H 2014
-
Dependence on mobile DRAM for >40% of bit shipments
-
Competition from DDR3L-RS
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23
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Smartphone DRAM Demand Trend
1,000
LOW COST CHINA UNITS
400
1,000
200
500
-
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31
3
Q
21
3
Q
11
3
Q
41
2
Q
Q
21
1
Q
24
31
2
-
Q
21
1
Q
31
1
Q
41
1
Q
11
2
Q
21
2
Q
31
2
Q
41
2
Q
11
3
Q
21
3
Q
31
3
-
54%
Q/Q
1,500
21
2
100
2,000
Q
22%
Q/Q
12%
26% Q/Q
Q/Q
11
2
200
600
23%
Q/Q
LOW COST SMARTPHONES
Q
37%
Q/Q
300
800
41
1
5%
Q/Q
10%
Q/Q
2,500
Q
MBYTE PER SET
ALL SMARTPHONES
31
1
400
11%
Q/Q
17%
Q/Q
3,000
Q
BRANDED SET UNITS
MOBILE-DRAM DEMAND
MILLIONS OF GBITS
500
Gbit Demand from Smartphones
MEGABYTES PER SET
MOBILE-DRAM DEMAND
MILLIONS OF GBITS
Components of Smartphone DRAM Demand
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
MOBILE-DRAM DEMAND
400
MOBILE-DRAM DEMAND
MILLIONS OF GBITS
SMARTPHONE BUILDS
MILLIONS OF UNITS
Limited Sources of S-Phone DRAM Demand Growth
APPLE/SAMSUNG
350
OTHER BRANDS
LOW COST
300
250
200
3,000
MOBILE-DRAM DEMAND
APPLE/SAMSUNG
2,500
OTHER BRANDS
LOW COST
2,000
1,500
150
1,000
100
500
50
-
Q
21
1
Q
31
1
Q
41
1
Q
11
2
Q
21
2
Q
31
2
Q
41
2
Q
11
3
Q
21
3
Q
31
3
11
Q1
12
Q2
12
Q3
12
Q4
12
Q1
13
Q2
13
Q3
13
11
Q4
Q3
Q2
11
-
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25
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
<$200 7”: Core of the Media Tablet Market
<$200
$200 - $299
$300 - $399
 In <$200 segment, branded
price average list price of
$189 v. MID avg. of $154
 MID competing against
“razor/razor-blade” pricing?
 Issues advancing HW
features in low-cost, small
form-factor product
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26
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Current DRAM Technology Use in Tablets
 LPDDR2 vs. DDR3/L
decision based on: cost,
PCB space constraints,
power & bandwidth
needs
 DDR3/L usage in MIDs
LPDDR3
and <$300 media tablets
(cost)
 DDR3/L usage in >$800
PC tablets (bandwidth)
Source: March 2013 Tablet Database, DE DIOS & ASSOC.
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27
3/21/13
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Price Trend of DRAMs for Tablets
4Gb Equivalent Price of DRAMs for Tablets
$6
LPDDR3 x32
LPDDR2 x32
DDR3L x16
DDR3L-RS x16
 LPDDR2 flattens out as volumes
DDR3L-RS x32
$5
decrease unless costs match
LPDDR3
$4
 DDR3L decreases with excess
production conditions in 1H 2014
$3
 DDR3L-RS premium of 20  15%
for x32 and 10  5% for x16
$2
 LPDDR3 decreases aggressively
$1
Q1
Q2
Q3
Q4
Q1
Q2
2013
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Reproduction prohibited without prior permission.
Q3
Q4
to compete with DDR3L-RS x32
2014
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DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Relative Operating Margins of DRAMs
Supplier Operating Margins:
LPDDR3 vs. DDR3/L x16
100%
LPDDR3 x32 PoP
80%
DDR3 x16
60%
40%
20%
0%
-20%
Q1
Q2
Q3
Q4
Q1
2013
© 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission.
Q2
Q3
Q4
2014
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DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Projected 2014 DRAM by Tablet Segment
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Reproduction prohibited without prior permission.
30
3/19/2013
DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Price Forecast of DRAMs for Tablets
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Reproduction prohibited without prior permission.
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DE DIOS & ASSOCIATES
Focused on our clients’ objectives
Conclusions
 We are now again in the pricing frenzy stage of a supply-driven
price upturn.
Will DRAM companies overdo it once more?
- Risks of weaker demand
 With buy ahead inventory, there is probably enough supply for all
OEMs in the 2H market
- Perception and weak demand can change direction and
momentum of prices
 The peak price is not as big a problem for the DRAM industry as
the rate of price increase
 DRAM companies need to decide on whether they want a new
pricing system or more of the old
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