1. DRAM MARKET UPDATE July 2013
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7/25/13

2. DRAM Market Entering a New Phase
Higher production growth in 2H 2013
Economic worries return
Weaker than expected PC and server DRAM demand
Uncertain mobile-DRAM demand
Profit margin challenges – PC and server OEMs
Use of market inventory – OEMs ending buy aheads
Seasonal demand weakness and excess production in Q114
More factors will pressure prices down – high chance of price correction, low chance of price crash
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7/25/13

3. Improving DRAM Production Growth
All DRAM Bit Production Trend
Shift from slow growth (Q412-Q213) to faster growth in 2H13
2H13 growth slower than past
Still 17% ’12-’13 bit growth
2H13 production drivers
4% wafer-out growth
8% bit/wafer productivity growth
Implications on market & pricing conditions
Depend on demand in 2H13 vs. supply in 1H13
Product mix becomes double- edged sword
Faster mfg. cost reductions
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7/25/13

4. Changes in DRAM Wafer Outs
DRAM Wafer Outs (Thousands)
DRAM Wafer Capacity and Outs (Thousands)
91%
Utilization
89%
Utilization
98%
Utilization
99%
Utilization
-13%
Growth
-6%
Growth 2%
Growth
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7/25/13

5. DRAM Process Migration & Productivity Trend
DRAM Process Transitions
Bit/wafer productivity growth
48%,
24%,
23%,
Lower productivity (~20% or less) beyond 2014
Limited by process complexity and capital spending
Jul ‘13
Jul ‘13
Jul ‘13
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7/25/13

6. DRAM Market Outlook for 2014
2014 DRAM Market Conditions – Millions of Gbits
Production Components
’12-’13
‘13-’14
Billions of Gbits
37.4
46.4
Bit Output Change
18%
24%
Wafer Out Change
-6% 2%
Bit/Wafer Change
23%
Weaker PC/server
demand can widen gap by 3-6 points
Demand
Components
’12-’13
‘13-’14
Billions of Gbits
35.0
43.8
Demand Change
24%
25%
PC-DRAM 0%
-1%
Server DRAM
26%
34%
Mobile DRAM
73%
54%
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7/25/13

7. DRAM Mix Changes: Impact on PC-DRAM Supply
Mobile DRAM Production (Millions of Gbits)
PC-DRAM Production Forecast (Millions of Gbits)
1H13  2H13
59% up
60% up
1H13  2H13
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7/25/13

8. Server DRAM Supply Forecast
Server DRAM Production by Supplier (Millions of Gbits)
DRAM companies will have excess supply in Q313 as OEMs use inventory
Each major DRAM supplier will dominate different markets
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7/25/13

9. Changes and Challenges of DRAM Demand
PC market will consolidate – response to declining growth, tighter profit margins, and consolidated supply of major components
Server OEMs will continue market-share push – declining profit margins from narrow growth segments
Mobile and tablet markets beset by low-cost alternatives in China and slowing innovation
PC & server leading OEMs will look for cost advantages over competition to gain market share
Quarterly pricing, wider price ranges, and use of inventory
Mobile DRAM packaging/configurations will standardize and price premiums over DDR3 will decrease
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7/25/13

10. PC Industry Consolidation: The Remaining Option
Monthly Mobile PC Build Trend (Millions of Units)
Quarterly Mobile PC Build Trend (Millions of Units)
Leading OEMs:
61% of builds, Q313
Leading OEMs:
54% of builds, Q312
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7/25/13

11. Price Ceiling in the DRAM Channel
DRAM Channel Pricing Dynamics
As we expected, attempt to raise prices to DRAM channel have failed
4Gb at $3.30
Spot prices down 11%, faster and deeper than the last price reduction in Mar/Apr
Channel resale prices now moving down – sign of elasticity – no volume above $30
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7/25/13

12. PC-DRAM Market Dynamics
PC-DRAM Market Conditions (Millions of Gbits)
PC OEMs using own DRAM inventory in 2H13
10% inventory reduction Q313
25% reduction Q413
Channel still preserving inventory through short shipments
Chances of a price correction in Q413 – 2H Oct
Some OEMs anticipate earlier correction because of declining purchases
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7/25/13

13. 4GB SODIMM Price Headed towards Correction
4GB SODIMM Price Trend
4GB SODIMM Operating & Cash Margin Trend
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7/25/13

14. Potential Impact of Server DRAM Market Inventory
Server-DRAM Market Conditions with Market Inventory Effect Millions of Gbits
Market forced to use inventory in Q313 to keep prices from rising and their profit margins from shrinking
Purchases from suppliers fall below production in Q313
Prices peaking in Q313
Returns to balance in Q413
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7/25/13

15. 16GB 2Rx4 RDIMM Price Forecast
16GB 2Rx4 RDIMM Price Trend
16GB RDIMM v. 4GB SODIMM Operating Margin
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7/25/13

16. 8GB 2Rx4 RDIMM Price Forecast
8 GB 2Rx4 RDIMM Price Trend
16GB RDIMM v. 4GB SODIMM Operating Margin
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7/25/13

17. Other RDIMM Price Trends
16GB EQUIVALENT PRICES OF RDIMMs
32GB RDIMM price decrease to resume with lower 16GB RDIMM price expectations
4Gb-based 8GB RDIMM price gap to widen against 2Gb-based 8GB with the ramp of Ivy Bridge platforms
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7/25/13

18. DRAM Process Transitions & Platform Releases
Platforms are entering at earlier stage of new DRAM process
Ivy Bridge – DDR3-1866
Sandy Bridge
DDR3-1600
Haswell
DDR4-2133
Broadwell
DDR4-2400
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7/25/13

19. DDR4 Product Outlook 4GB 1Rx8 RDIMM 8GB RDIMM: 1Rx4, 2Rx8
Limited customer qualifications (return on qualification cost)
x8 advantage depends on leveraging PC demand
How different will server and PC DDR4 be?
8GB RDIMM: 1Rx4, 2Rx8
Possible limited suppliers of 8GB RDIMM
Not expected to be mainstream module w/o 2Rx4
Some OEMs prefer the 2Rx8 over 1Rx4
x8 issues of 4GB RDIMM also apply
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7/25/13

20. DDR4 Product Outlook 16GB 2Rx4 RDIMM
Mainstream RDIMM: established in 2014 with DDR3, continue at DDR4
Will not change until a cost-effective 8Gb-based version is available
32GB RDIMM: 4Rx4 LRDIMM, 2Rx4 RDIMM
Suppliers will prefer a 2Rx4 RDIMM solution to a 4Rx4 LRDIMM because of LRDIMM cost
8Gb SDP volume to emerge in early Q115 but supplier base will have to evolve beyond that
25nm or 20/21nm?
64GB RDIMM: 4Gb-based 3DS or 8Gb-based 4Rx4 LRDIMM
Will volume justify 3DS development?
LRDIMM cost per 8Gb is about 44 cents, a large percentage of DRAM unit cost – 8Gb SDP cost manageable
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7/25/13

21. Conclusions and Recommendations
DRAM market entering a new phase –
Market moving from buy aheads to use of inventory
DRAM production higher
Product mix gives suppliers leverage at least through Q313
Price correction likely, price crash chance is low
DRAM profit margins can absorb a price correction
Long term insight: Future server-platform generations will enter at earlier stage of DRAM process because of slow process transitions
Implications on cost and roadmap
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7/25/13

22. RDIMM Price Table © 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
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7/25/13