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TMT <strong>Memory</strong> Devices Technology 8 October 2010 abc % of total NAND bit demand from tablets System unit and GB/system growth for tablets 15 10 5 0 120 100 80 60 40 20 0 60 50 40 30 20 10 0 2009 2010f 2011f 2012f 2009 2010f 2011f 2012f % of NAND demand Sy stem units (m) GB/sy stem Source: HSBC estimates Source: HSBC estimates Tablets We forecast tablet shipments to soar to 73m units next year, accounting for a quarter of our forecast tablets plus notebooks. Tablets represent a major new NAND application that has explosively entered the scene. DRAM An emerging concern for commodity DRAM is that tablets will cannibalise netbook and notebook sales, reducing overall DRAM demand. We estimate 1%, 5% and 5% cannibalisation impact on global DRAM demand for 2010-12e. DRAM vendors such as Samsung and Elpida that can supply low-voltage, low-power DDR (and increasingly DDR2) that could be integrated into tablets stand to benefit. The cannibalisation impact will really start to be felt next year, when we estimate tablets will account for 26% of tablet plus notebook units but only c6% of tablet plus notebook DRAM bits. We expect DRAM content in tablets to start rising quickly next year to support multi-tasking and more resource-intensive apps. We think this is possible, given DRAM is only c3% of BOM for current Apple iPads. We think 5- 6% is more likely next year as 512MB becomes standard. By 2012e we expect tablet DRAM would reach above 1GB per system, catalysed by Windows and competitive pressure amongst tablet vendors to differentiate their products. NAND We expect tablets to account for 13% of global NAND demand next year (2010: 5%), mostly driven by a massive 214% 2010/12e bit growth rate from a standing start this year. We expect GB/system to initially rise slowly as tablets will mostly run compact Android and iOS operating systems. Key beneficiaries are Toshiba and Samsung. For Apple’s iPad NAND as a proportion of hardware-only BOM varies between 10% and 30% depending on the model. We expect falling ASPs to drive content/system; 16GB is about the minimum acceptable onboard NAND storage for a tablet in our view. Vendors should have little problem meeting this requirement this year. Next year, as ASPs fall to cUSD1/GB, 32GB of NAND would account for 18% of BOM, which we think is a reasonable level. Interestingly, we think Windows 7 could drive tablet GB/system. Windows could mount a belated but serious challenge in the tablet market, as tablet hardware that could support resources-intensive Windows becomes available including Intel’s new Oak Trail processor which is set to appear in devices starting 1H11. For Windows tablets, we think there would be a larger NAND requirement as a full implementation of basic Windows 7 needs a bare minimum 16GB of storage. 11
TMT <strong>Memory</strong> Devices Technology 8 October 2010 abc EBIT margins for memory manufacturers 60% 40% 20% 0% -20% -40% -60% -80% -100% -120% -140% -160% Samsung Hy nix Elpida Toshiba Pow erchip Nany a Inotera ProMOS Micron SanDisk 2006 2007 2008 2009f 2010f 2011f Source: HSBC estimates, Bloomberg consensus Revenue, EBIT for memory manufacturers Revenue (USDm) SEC Hynix Elpida Nanya Tech Inotera Winbond 2007 17,306 8,605 3,877 1,610 1,396 746 2008 22,353 6,818 3,557 1,151 1,190 581 2009 26,808 7,906 3,927 1,284 1,098 594 2010e 37,461 12,429 7,055 1,899 1,450 1,020 2011e 40,639 13,217 6,662 2,538 2,013 1,040 2012e 44,382 14,723 6,969 3,072 2,472 1,141 Revenue changes (%) SEC Hynix Elpida Nanya Tech Inotera Winbond 2008 29% -21% -8% -28% -15% -22% 2009 20% 16% 10% 12% -8% 2% 2010e 40% 57% 80% 48% 32% 72% 2011e 8% 6% -6% 34% 39% 2% 2012e 9% 11% 5% 21% 23% 10% EBIT margin (%) SEC Hynix Elpida Nanya Tech Inotera Winbond 2007 25% 6% 3% -17% 7% -41% 2008 10% -28% -33% -66% -48% -46% 2009 8% 2% -17% -37% -27% -31% 2010e 28% 30% 21% -6% -8% 11% 2011e 20% 26% 8% 8% 8% 7% 2012e 19% 22% 9% 11% 13% 10% EBIT (USD) SEC Hynix Elpida Nanya Tech Inotera Winbond 2007 4,340 492 134 (273) 96 (303) 2008 2,143 (1,920) (1,175) (765) (573) (268) 2009 2,059 191 (648) (482) (293) (182) 2010e 10,508 3,741 1,454 (114) (117) 111 2011e 8,328 3,379 563 199 171 75 2012e 8,249 3,296 616 336 315 111 EBIT changes (y-o-y%) SEC Hynix Elpida Nanya Tech Inotera Winbond 2008 -51% nm nm nm nm nm 2009 -4% nm nm nm nm nm 2010e 410% 1858% nm nm nm nm 2011e -21% -10% -61% nm nm -33% 2012e -1% -2 9% 69% 84% 48% Source: Company, HSBC estimates, note SEC is for consolidated Semiconductor division figures 12
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Asia Memory-Bad memories fading

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