Macro weakness, the demand-supply imbalance, intense competition
and declining selling prices lowered Micron Technology's (
) top line growth and impacted its profitability in 2012. However,
increasing consolidation in the industry, rising demand from non-PC
markets, and improving memory product prices returned
this leading memory products manufacturer to
profitability in fiscal 2013.
DRAM memory product prices declined drastically in 2011 and
2012, after increasing by 28% in 2010, due to the impact of excess
manufacturing (so-called fab) capacity. However, the DRAM average
selling price (per Gb) increased approximately 10% in 2013 as
strong demand in high growth markets allowed for the absorption of
the excess capacity and restricted supply, which in turn led to
higher memory products prices.
We believe that the DRAM memory product prices will continue to
decline, though at a lower rate, for the rest of our review period.
Our price estimate of $22
is at a 15% discount to the current market price.
our complete analysis for Micron here
Why DRAM Prices Stabilized In The Last Few Months?
In light of declining PC sales and rising demand for mobile
devices, the DRAM industry is witnessing a shift in manufacturing
capacity away from PCs to higher growth segments such as mobile
handsets, tablets, servers, automation and networking. With the
market shifting from traditional desktops and laptops to
mobile devices and embedded computing systems, less fabrication
facility capacity will be allocated to commodity DRAM
As capacity shifted away from commodity DRAM production, buyers
started building up their inventory to avoid any potential
supply shortage in the future, especially since the decline in PC
sales appears to be troughing. This resulted in an upsurge in DRAM
product prices in the last few months. Samsung, which is the
largest DRAM manufacturer, had increased its mobile DRAM
production (by 30,000 wafers per month) due to better than
anticipated demand for the Galaxy S4 and other Smart Phones and
Here are some other recent events that contributed to the rise
in DRAM prices:
earthquake that struck Taiwan
drove up DRAM prices as major Taiwan-based memory module
makers such as Rexchip, Winbond, Nanya Technology and Inotera
Memories reported silicon wafer damage problems after the quake.
Because semiconductor manufacturing requires such extreme
precision, resetting production takes time and this limits
- In September 2013, a significant
fire at SK Hynix's
Chinese fab damaged equipment and left the plant offline. Hynix
accounts for 25.7% of the DRAM market and the temporary disruption
in its operations led to a shortage in DRAM supply, which increased
DRAM prices by 19% in September 2013.
Factors That Will Put A Downward Pressure On DRAM Prices
In The Future
We believe that the upward trend in DRAM prices might not last
in the long run as the underlying cause for the current upsurge in
prices is more due to the strategic move of OEMs rather than any
fundamental change in market demand. The contract prices of dynamic
random access memory (
) began to decline in January 2014.
Below are some factors that contributed to the decline in prices
Restoration of operations at Hynix
As SK Hynix fully recovers and gets back to production
the supply situation will ease in the industry. SK Hynix's DRAM
shipments were expected to increase by 20% in Q1 2014.
- Increasing mobile DRAM sales:
While commodity DRAM prices have been rising, the average price for
mobile DRAM has been declining. Mobile DRAM prices declined
sequentially by 15% in Q1 2013 (calendar year), the second largest
drop in the preceding six quarters. The downward trend continued
with contract prices declining 5-10% in January 2014. Currently
mobile DRAM accounts for approximately 30% of total DRAM shipments
but its proportion is expected to increase in the future. Mobile
DRAM has seen a steady decline in its price over time and the trend
could continue in the future. With the rising proportion of mobile
DRAM in total DRAM shipments, the ASP of DRAM memory products can
decline in the future.
DRAM business is cyclical in nature characterized by prominent
oversupply and undersupply cycles. Currently, the industry is
transitioning from an undersupply to oversupply situation. However,
Micron claims as supply dynamics in the industry improves, the
higher demand will stabilize the decline in selling prices.
See More at Trefis
View Interactive Institutional Research
(Powered by Trefis) |
Get Trefis Technology