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TMT <strong>Memory</strong> Devices Technology 8 October 2010 abc High-end computing DRAM MB bn, % of total DRAM demand PC server DRAM MB bn, % of total PC DRAM demand 500 12% 400 20% 400 300 200 100 11% 11% 10% 10% 9% 300 200 100 15% 10% 5% - 9% - 0% 2009 2010f 2011f 2012f 2009 2010f 2011f 2012f High-end com puting % of total x 86 serv ers % of total PC Source: IDC, HSBC estimates Source: IDC, HSBC estimates Enterprise Enterprise flash drives We think the enterprise server and storage market provide tangible upside risk to revenue and margin forecasts for leading vendors that are positioned to cater to this high-end market. Enterprise server DRAM demand Servers – niche, but very high ASP market We expect continued corporate spend plus ongoing growth of cloud computing to drive strong demand from this segment. Key beneficiaries include Samsung and Hynix. We forecast server unit growth of 10% y-o-y in 2011, but higher content/box growth of 38%; server memory content/system tends to double every two years. Servers (including PC servers) account for about 10% of total global bit demand, but the blended ASP impact is far higher for vendors, at 2.5x for a 4GB module up to 6x for a 16GB module. Price premiums are driven by high-density, high performance and lower power consumption, in addition to higher production costs. Demand will be further catalysed by availability of high-density (2Gb and 4Gb very soon), low-power DRAM modules. A major upside risk to high-end SSD demand Similarly, the server storage market offers disproportionately high revenues and margins. Key beneficiaries of this market include Samsung, IMFT and Hynix, to be joined next year by Toshiba. We do not separately model the server NAND market in our forecasts but this analysis illustrates the potential upside risk to our forecasts. High-end server SSD storage is very expensive. Despite this, data centres and corporates use SSD due to 1) extremely fast data input/output, especially important for cloud computing, 2) small form factor (space), 3) low power consumption. As ASPs fall, we expect SSDs will replace HDDs as ‘front line’ storage, with HDDs acting as inexpensive backup. We estimate that server storage could account for the equivalent of 12-17% of our 2012 forecast global NAND revenue, and the equivalent of 20- 32% our forecast 2013 NAND global revenue. These estimates assume SSDs account for 5% and 10% respectively of 2011-12 disk storage systems and are based on SLC. 9
TMT <strong>Memory</strong> Devices Technology 8 October 2010 abc Smartphones Telecoms is becoming a major consumer of DRAM, accounting for 9 % of DRAM bit demand this year and growing to 10% in 2012e. Mobile handsets have also emerged as the leading usage of NAND on proliferation of smartphones. Handsets account for 37% of our 2011 NAND bit demand forecast, growing to 42% of total NAND bit demand by 2012. We forecast smartphone unit shipments to rise 54%, 39% and 35% during the periods, accounting for 35% of total handsets shipped globally by 2012e (2009: 16%). Mobile DRAM Smartphones are driving rapid mobile DRAM bit growth through both unit shipment growth and content per box. Development of smartphones now mirrors that of PCs, driven by resourceintensive wireless broadband, multimedia and multitasking. We expect DRAM content to rise in parallel with surging computing power to support these demands as well as next-iteration operating systems such as Android 3.0. Mobile DRAM prices tend to be higher on a bit basis, as memory vendors need to work closely with mobile phone makers to incorporate custommade solutions for specific handsets. Samsung, Elpida and Hynix are leaders in mDRAM. The higher-end mDRAM market (i.e. 128MB upwards) is dominated by major DRAM players that are capable of customising MCP (multichip packages) for handset vendors. We forecast mDRAM bit growth to rise 102%, 92% and 112% y-o-y for 2010-12. We assume DRAM content/system for smartphones to rise 31%, 39% and 57% for 2010-12, to around 390MB by 2012. Mobile NAND We forecast GB/system for smartphones to double each year during 2011-12 driven by lower NAND prices, availability of larger capacity mobile NAND, rapidly rising screen resolutions, higher resolution video, games content and cannibalisation of media players. We estimate NAND on a 16GB Apple iPhone 4 to account for 14% of BOM, a level which we think will be maintained going forward. We assume most non- Apple smartphones will use less NAND than Apple to lower prices, obliging the consumer to buy flash cards to fulfil extra storage needs. 10
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