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TMT<br />
<strong>Memory</strong> Devices Technology<br />
8 October 2010<br />
abc<br />
Together with Samsung, Hynix is leading the<br />
market in DRAM process migration. As at end-<br />
2009, c45% of DRAM was made on the 54nm<br />
process, plus a low single digit proportion of<br />
44nm process DRAM. Hynix is ramping 44nm<br />
production, initially focussed on the lucrative<br />
server market. Hynix achieved low-teens bit<br />
production on the 44nm process by 2Q10, slightly<br />
slower than previous guidance of mid-teens.<br />
DRAM process migration<br />
100%<br />
80%<br />
60%<br />
40%<br />
20%<br />
0%<br />
2007 2008 2009 2010f 2011f 2012f<br />
8xnm 6xnm 5xnm 4xnm 3xnm 2xnm<br />
Source: Company, HSBC estimates<br />
Nevertheless, the firm expects 44nm migration to<br />
reach 30% of DRAM bit production by end of 3Q<br />
and 50% by end of 4Q, following its revised<br />
capex in June. We expect Hynix to start mass<br />
production of its 3xnm process during 1Q11.<br />
growth areas of mobile, graphics, high-end server<br />
and specialist DRAM (used in consumer<br />
electronics). Hynix plans to raise global mobile<br />
DRAM market share to c30% in 2010 from c7.1%<br />
in 2007. Hynix expects the revenue proportion of<br />
non-PC DRAM to rise to 60% of total in 3Q (2Q:<br />
mid-50%; 2009: c53%). Server, mobile and<br />
specialist DRAM accounted for c20%, c10% and<br />
c10% of revenue in 2Q10.<br />
The main advantage of these segments, other than<br />
high growth rates, is relatively stable margins.<br />
Mobile DRAM prices tend not to be as volatile as<br />
PC DRAM; ASPs tend to fall c5% every quarter<br />
5%. In addition to PC and server use, consumer<br />
electronics devices are now migrating to DDR3,<br />
driving continued recovery of ASPs for specialist<br />
DRAM.<br />
NAND<br />
Revenue, margin outlook<br />
This year, we forecast consolidated revenue to<br />
rise 39% in KRW terms, on 94% bit growth and<br />
ASP decline of 21%. We expect the KRW to<br />
strengthen 12% compared to last year.<br />
NAND revenue growth<br />
4,000<br />
20.0%<br />
Wafer capacity (kwpy), average fab utilisation<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
-<br />
100%<br />
95%<br />
90%<br />
85%<br />
80%<br />
75%<br />
70%<br />
3,000<br />
2,000<br />
1,000<br />
-<br />
2007 2008 2009 2010f 2011f 2012f<br />
Revenue (KRW bn) OPM<br />
10.0%<br />
0.0%<br />
-10.0%<br />
-20.0%<br />
-30.0%<br />
2007 2008 2009 2010f 2011f 2012f<br />
Source: Company, HSBC estimates<br />
Wafer capacity (kwpy) Average utilisation (%)<br />
Source: Company, HSBC estimates<br />
Speciality DRAM<br />
A key Hynix strategy this year has been to<br />
diversify from commodity memory into rapid<br />
We forecast 2011e revenue growth of 53%; bit<br />
growth is to accelerate to 167% y-o-y on 33% rise<br />
in wafer capacity and process migration. We<br />
assume a 35% ASP fall. We also assume another<br />
6% strengthening in the KRW versus the USD.<br />
70