February 2015 DRAM MARKET UPDATE DE DIOS ASSOCIATES
February 2015 DRAM MARKET UPDATE DE DIOS & ASSOCIATES Focused on our clients’ objectives © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 1 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Major DRAM Market Developments § Supplier Base Developments - Samsung as central figure in 2015 production: growth and flexibility § Supply Continuity or Disruption - 5% excess production in Q 115 - Product mix shifts sharply to mobile in Q 215 - 2 H 15 supply risks are still high: process transitions and new fab ramp adjustments § DRAM pricing developments - Price reductions causing server DRAM pricing discrepancies - Multi-level pricing based on customer volume and growth - Intent to slow Q 215 price reductions § Inventory - Users need to rethink inventory vs. potential supply risks © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 2 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Risks From SK-Hynix & Micron Process Migration SK Hynix Bit Output by Process Generation © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. Micron Bit Output by Process Generation 3 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Risks from Samsung Production Flexibility Samsung Bit Output by Process Generation © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. Samsung Bit Output by Fab 4 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives DRAM Demand Outlook in 2015 § 4% excess production in 2015 § 5% excess production in Q 115 § Weaker PC-DRAM and slightly weaker mobile DRAM demand § Higher server demand growth § Graphic memory demand strong in Q 115 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 5 1/14/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Product Shift Mix to LPx DRAM in Q 215 Smartphone DRAM Market Conditions § Samsung may shift mix to mobile DRAM in Q 215 - Meet 9% higher demand - Build ahead of high Q 315 demand to limit capacity buildup - Est. 16% Q/Q LPx output growth. 4 point increase in mix share § Assume others will also shift mix to mobile DRAM in Q 215 - © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 6 Est. 9% Q/Q LPx output growth to meet 4% Q 215 and 24% Q 315 demand growth 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Impact of Higher LPx Mix on Other DRAMs in Q 215 Non-Smartphone DRAM Market Conditions § Samsung’s bit output decreases 1% Q/Q in Q 215 § Other companies’ bit output increases by 5% Q/Q in Q 215 § Overall bit output up 2% Q/Q to meet 3% Q/Q demand growth § Still see 6% excess production over demand but with a different supplier base © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 7 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Major Drivers of DRAM Prices § DRAM companies worried about prices will enter a “vicious circle” - Lower prices increase user inventory risk, lower prices to reduce user risk - Lower prices reduce revenue, force suppliers to push bits leading to lower prices - Product mix as short term solution - Fab adjustments as near term Q 415 solution § Theoretical price resistance when moving inventory does not lead to more profit - So far low chance of reaching this resistance point, depends on demand § Suppliers’ current pricing hierarchy and practice - Protect mobile DRAM prices first, then server DRAM, then PC DRAM - Multi-tier prices due to consolidating market: solidify business with customers with volume, growth, new product adoption - Mobile inventory buildup in Q 215 can lead to more price competition in Q 315 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 8 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Trend towards User Concentration § Top 5 DDRx user share: from 54% in 2014 to 60% in 2015 - HP, Dell, Lenovo, Kingston, Google, Apple - Rising positions of leading datacenter customers – next wave - Top 7 PC DRAM users had 78% share of consumption § Top 5 LPx user share: 2/3 of bit consumption - Samsung, Apple, Xiaomi, Lenovo, Huawei - Rising value of Xiaomi and share of leading China brands § Concentration of growth in datacenter and smartphone DRAM demand § Multi-tier pricing by suppliers across customers and markets - Lock up larger customers for lower sales cost and effort - Reduce product-mix risks - Ensure transition to new products: DDR 4, LP 4 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 9 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives 4 GB DDR 3 SODIMM Price Trend Forecast of 4 GB DDR 3 SODIMM Price – Averages and Range Q 215 Avg. OEM $25. 61 Low Avg. $25. 00 Q 415 Avg. OEM $24. 06 Low avg. 23. 40 Q 115 Avg. OEM $28. 17 Low Avg. $27. 17 Q 315 Avg. OEM $24. 66 Low Avg. 24. 00 22% drop, 2014 -2015 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 10 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Major Server DRAM Developments § Signs of our expected double-counting of demand - Several server OEMs building inventory – both DDR 3 and DDR 4 - Datacenter demand proving “lumpy” once again in Q 115 § Special pricing deals set target for lower prices § Pricing issues - Widening price gap between 32 GB and 16 GB: rethink transition to 32 GB? - DDR 4 price premium may stay high as DDR 3 reference price falls - Roadmap implementation: 8 Gb DDR 4 § DDR 4 transition - Higher mix of DDR 4 buys due to DDR 3 user inventory - Mixed signals on speed of transition across customers (25% share in Q 115) - Start of client adoption in 2 H 2015 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 11 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Client Transition to New Memory Technologies Share of PC-OEM DRAM GB Demand by Memory Performance Technology Transition of PC-OEM DRAM GB Demand to New Memory Technologies Adds 15% more bit demand above that from servers in 2 H 15 Client DDR 4 demand will be 33% of total in 2016, 40% of total in Q 416 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 12 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives 16 GB DDR 3 2 Rx 4 RDIMM Price Trend Forecast of 16 GB DDR 3 2 Rx 4 RDIMM Price – Average and Range -30% CAGR, 2011 -2015 +10% increase, 2013 -2014 73% drop, 2011 -2012 11% drop, 2012 -2013 Q 115 Avg. OEM $129. 6 Low $126 Q 315 Avg. OEM $121 Low $120 Q 215 Avg. OEM $123. 50 Low $122 Q 415 Avg. OEM $119 Low $116 8% drop, 2014 -2015 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 13 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives 32 GB DDR 3 4 R LRDIMM Price Forecast 32 GB DDR 3 4 Rx 4 LRDIMM Price Forecast 15% drop, 2014 -2015 Q 115 Avg. OEM $301 40% drop, 2012 -2013 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 12% drop, 2013 -2014 14 Q 315 Avg. OEM $273 Q 215 Avg. OEM $281 Q 415 Avg. OEM $265 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives 16 GB DDR 4 2 R RDIMM Price Forecast DDR 4 5 -10% premium mid-2015 Q 115 Avg. OEM $155 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 15 Q 215 Avg. OEM $142 Q 315 Avg. OEM $134 -28% drop, 2014 -2015 Q 415 Avg. OEM $126 DDR 4 5% premium Q 415 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives 32 GB DDR 4 Module Price Forecast 32 GB DDR 4 2 R RDIMM Price Forecast Price Trend of 32 GB Equivalent Solutions Q 415 Avg. OEM $269 Q 115 Avg. OEM $363 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 16 Q 215 Avg. OEM $327 Q 315 Avg. OEM $299 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Relative Pricing of PC and Server DRAMs © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 17 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Mobile DRAM Market Developments § Slight 2 -3% reduction of average market prices in Q 1 2015 § Expect small price movement in Q 2 2015 - Samsung captive demand accumulation of inventory for Q 315 § Samsung and Apple enjoy preferential pricing - Expect it to track with the highest of equivalent PC or Server DRAMs § LP 4 transition - Overheating of supporting Qualcomm processor - Market to be driven by Exynos and Apple Aps - Moderate transition from low-end AP makers in 2 H 2015 - Special pricing for major users. Market price pricing at 30%+ premiums. © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 18 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Mobile DRAM Price Outlook Comparison of Mobile DRAM Prices against Server & PC DRAM Prices © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 19 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Analysis of First Real Price Resistance Points 2014 2015 (Current Forecast) 2015 (Supplier Resistance Point) Est. 4 Gb Equiv. ASP Change from 2014 Mobile DRAM 4. 37 3. 71 -15% PC DRAM 4. 09 3. 19 -22% 2. 90 -29% Server DRAM 3. 72 3. 42 -9% 3. 13 -16% Graphics DRAM 4. 90 4. 03 -18% 3. 49 -29% Consumer DRAM 4. 80 4. 32 -10% ALL DRAMs 4. 24 3. 61 -15% 3. 40 -19% Revenue Change +7% +2% Profit Margin Change +2 pct. points 0 pct. point 9% PC/Server DRAM price drop from current forecast to 1 st resistance point © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 20 2/12/15
DE DIOS & ASSOCIATES Focused on our clients’ objectives Conclusions § Product mix already shifting in Q 215 towards mobile DRAMs - Supplier base pricing behavior changes - Dynamic supplier base strategies required – not same as Q 115 - Set commitments from suppliers: leverage concentration of growth § Preserve and plan your inventory - Remember the rule: whoever holds inventory controls price - Reduce supply risks from process transitions and product mix § Show optimism to supplier on 2 H 2015 demand to preserve supplier production plans § DDR 4 transition issues may rise: supply or price - Issues: DDR 4 price premiums, demand penetration, and client adoption of DDR 4 © 2015 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without prior permission. 21 2/12/15
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