Asia Memory-Bad memories fading

TMT
Memory Devices Technology
8 October 2010
abc
Demand drivers – DRAM
We forecast 2010/12 bit CAGR of 46% as price elasticity starts
kicking in on ASP declines
PC bit growth from higher per box content; smartphone DRAM set
to grow on higher content
Leading vendors best positioned to harness high-end demand
from low-voltage, high-performance mobile and server application
Time to look at the upside risk
The market now generally expects ASP declines
for the coming 2-3 quarters, driving negative
sentiment and potentially poor share price
performance. Here, instead of focussing on widely
accepted negatives, we focus on upside risks to
forecasts, i.e. factors that could potentially turn
around operating and hence share price
performance. We expect DRAM demand to
remain healthy, growing at a 46% CAGR for
2010/12e. For this year and next year, we expect
48% and 47% y-o-y bit demand growth
respectively. Driving this demand are 1) price
elasticity on sharply lower ASPs, mobile handsets
led by smartphones and 3) strong continued
corporate demand for PCs and servers.
Price elasticity to support DRAM bit growth.
Near term overall PC demand remains relatively
unclear, weighed down by weak consumer
sentiment in developed markets. However, we
expect corporate demand to provide support for
demand as a whole. For the global PC DRAM
market, we forecast content/box rising 33% y-o-y
for 2011, having slowed to c27% this year
(excluding tablet PCs). We expect PC OEMs to
start raising content/box again in 4Q10 as 2GB
modules fall below USD30/2GB. Indeed, 1Gb
DDR3 contract prices for 2H September fell
below USD2 already for the first time since 2H
October 2009. We expect DDR3 contract ASP to
continue falling steeply in 3Q10-1Q11 on rising
supply from vendors’ wafer capacity expansion
and process migration.
Tablets impact commodity, positive for
advanced players. We expect tablets to lower
global DRAM bit demand by c1% this year and
c5% for each of 2011-12e global demand. We
believe memory vendors that can supply the lowvoltage,
low power DRAM for integration with
SoC used in tablets stand to benefit.
Leading vendors best positioned to deliver
higher-end products, and protect margins with
process migration. We think product mix will
become more critical for memory vendors during
the next few quarters as ASP falls steepen. Rapid
process migration by leading DRAM vendors
results not just in better cost structure; from a
competitive perspective, this enables them to meet
demand for low-power parts that advanced nodes
are better suited to deliver, both for mobile
devices space (notebooks, smartphones, tablets)
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