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TMT Memory Devices Technology 8 October 2010 abc Industry snapshot, themes DRAM set for oversupply until 2Q11, until price elasticity offsets flood of bit supply. NAND demand-supply looks more positive Higher-end DRAM and NAND producers to benefit from strong structural demand growth from mobile, enterprise computing Relentless process migration and higher-end product mix benefit leading vendors Demand & supply forecast (USDm) 2008 2009 2010e 2011e 2012e 1Q10e 2Q10e 3Q10e 4Q10e 1Q11e 2Q11e 3Q11e 4Q11e Memory Revenue (USDm) DRAM 23,988 42,890 43,497 46,497 44,355 9,856 11,290 10,934 10,811 10,413 10,590 11,118 11,377 NAND 11,857 16,238 21,384 24,834 20,498 3,569 4,066 4,234 4,369 4,545 5,208 5,758 5,872 Total 35,844 59,128 64,881 71,332 64,853 13,424 15,356 15,168 15,180 14,958 15,798 16,876 17,249 Wafer Capacity (12” equ. kwpa) DRAM 16,985 18,206 18,881 20,366 21,341 1,489 1,489 1,514 1,569 1,569 1,569 1,569 1,569 NAND 9,194 10,476 12,529 15,129 15,849 829 867 878 918 948 978 1,095 1,155 Memory Shipment DRAM (1Gb eq.) 10,413 15,488 23,071 32,990 42,523 3,338 3,557 3,936 4,657 5,005 5,423 6,024 6,619 NAND (16Gb eq.) ,457 2,492 5,335 9,921 12,599 465 575 671 780 924 1,174 1,492 1,744 Memory ASP DRAM (1Gb eq.) 2.30 2.77 1.89 1.41 1.04 2.95 3.17 2.78 2.32 2.08 1.95 1.85 1.72 NAND (16Gb eq.) 4.07 3.26 2.00 1.25 0.81 3.83 3.53 3.16 2.80 2.46 2.22 1.93 1.68 Memory sales change (%) DRAM 0% 79% 1% 7% -5% 7% 15% -3% -1% -4% 2% 5% 2% NAND -3% 37% 32% 16% -17% -5% 14% 4% 3% 4% 15% 11% 2% Total -1% 65% 10% 10% -9% 4% 14% -1% 0% -1% 6% 7% 2% Wafer Capacity change (%) DRAM -1% 7% 4% 8% 5% 0% 0% 2% 4% 0% 0% 0% 0% NAND -5% 14% 20% 21% 5% 1% 5% 1% 5% 3% 3% 12% 5% Bit Shipment change (%) DRAM 22% 49% 49% 43% 29% 5% 7% 11% 18% 7% 8% 11% 10% NAND 41% 71% 114% 86% 27% 4% 24% 17% 16% 18% 27% 27% 17% Memory ASP change (%) DRAM -18% 20% -32% -25% -26% 2% 7% -12% -16% -10% -6% -5% -7% NAND -32% -20% -38% -38% -35% -9% -8% -11% -11% -12% -10% -13% -13% Source: IDC, HSBC estimates 7
TMT Memory Devices Technology 8 October 2010 abc DRAM – price elasticity drives higher content/box We expect DRAM price declines to start slowing in 2Q11 as lower ASPs from sharply higher supply during 4Q10-1Q11 stimulate higher content/system and as supply increases peak out. Overall, we expect content/system to rise 33% next year, following a 27% y-o-y rise in 2010; high ASPs this year depressed content growth this year. DRAM demand and ASPs 2009 2010e 2011e 2012e ASP (USD) -18% 20% -32% -25% Content/system (MB) 27% 27% 33% 32% Units shipments (m) 2% 14% 7% 9% Demand (MB bn) 30% 46% 42% 43% Source: HSBC estimates Bit growth in the coming quarters could surprise on the upside. We expect PC OEMs to gradually start raising content/box starting in 3Q on steep price declines; 2GB DDR3 modules now cost around USD36, 23% below the peak of USD46.5 in May. We expect price elasticity to kick in meaningfully in 4Q10 on persistent DRAM pricing weakness arising from expanded supply. We model 18% q-o-q average ASP decline for DDR3 contract prices in 4Q10, implying an average price of USD32 per 2GB module for the quarter. At that level, 4GB content/system on desktops should accessible to the majority of PC OEMs. By 1Q11, 2GB modules could have fallen to around USD28, starting to drive real increase in content/system above the 4GB level. For higherend PCs, we expect content/box climbing to 6- 8GB next year to competitively differentiate. We also expect accelerating adoption of higherend 4GB modules based on 4x-5xnm 2Gb parts. Leading DRAM vendors such as Samsung and Hynix that are rapidly shifting production of 2Gb parts to 4xnm and below from 5xnm will benefit the most from this trend. NAND NAND remains an exciting high-growth segment. We forecast 2010-12 NAND bit demand CAGR of 103%, rising 114% next year. Global appetite remains insatiable for storage capacity that is fast, robust and low-power. NAND demand forecast 45,000 120% 100% 30,000 80% 60% 15,000 40% 20% - 0% 2009 2010f 2011f 2012f Demand ( GB, m) Change, y-o-y (%) Source: IDC, HSBC estimates Foreseeable demand remains strong on rising affordability, expanding applications in high potential markets such as smartphones, tablets, PC storage plus nascent markets such as automotive applications. We continue to believe the risk is on the upside, as demand accelerates on more rapid affordability trends. Unlike DRAM, NAND demand remains strong for both commodity parts and embedded solutions. The main embedded demand driver is handsets, led by smartphones, which we estimate will account for 37% of total bit demand next year, up from 28% in 2009. Another embedded solutions driver is tablets, a segment which practically did not exist until April this year. We expect SSD growth, which had been stalled this year by high ASPs to see rapid growth due to falling NAND prices and indirect demand stimulation through the ‘tablet effect’. 8
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