TAIPEI, TAIWAN:
DRAMeXchange believes that the
DRAM industry has entered the key adjusting stage of "reduce or retire." The big scale reduction is now in progress and even some
DRAM vendors will be out of the DRAM market in 2009. This adjusting wave will continue until the demand and supply come to balance.
According to DRAMeXchange, the DRAM vendors' cash cost of the current main stream 70nm technology is USD1.3 to 1.5 , and lower to USD1.0 to 1.2 with the migration to the 6xnm process, which vendors mostly started in 1H08. In September and October, the DRAM DDR2 price plunged 20 percent and both October contract and spot price reached new low of USD 1.3 and 1.0.
Under the global economic recession, demand is hard to recover in the short term and the DRAM price is difficult to have quick rebound. With the continuous loss, the DRAM vendors are tight on cash. Under the financial crisis and global economic recession, banks have tightened loans and liquidity risk has risen. The difficulty of fund raising from capital market is much higher.
Therefore, DRAMeXchange believes that the DRAM industry has entered the key adjusting stage of "reduce or retire". The big scale reduction is now in progress and even some DRAM vendors will be out of the DRAM market in 2009. This adjusting wave will continue until the demand and supply come to balance.
Total 12" wafers down by 6 percent by first wave cutback
In early September, Powerchip's decided to cut DRAM production by 10 percent~15 percent (13k~19k wafers) and request that the other DRAM manufacturers to tackle the severe oversupply problem in DRAM market. Elpida followed several days later by announcing production reduction of 10 percent (10k wafers) at its Hiroshima facility.
By September 22, the world's second largest DRAM manufacturer, Hynix also announced in cutting back production, halting nearly all of its 8" facilities, including its facility at Oregon in USA, Wuxi Suzhou in China and its largest 8" facility in Korea, leaving only a single 8" facility with 100k wafer/month capacity.
Total 12" wafers down further 10 percent by second wave cutback
Inotera, after Micron has confirmed its acquisition of Inotera's shares from Qimonda, announced it will reduce production by 20 percent starting November in order to prepare for the technology migration. Next year January, Nanya will shut down Fab3 Phase1 completely and begin migration to Micron process in February.
ProMOS has announced it will stop its 8" production facility. Powerchip may reduce another 20K production in November down to 90K. DRAMeXchange estimates total reduction for November, based on announcements in October, to be roughly 125K, or 10 percent of total 12" wafers.
Third wave in January'09 to cut 6 percent more
Although not yet announced in public but resources say that ProMOS confirmed that it will have a one month shutdown next January for annual maintenance. Nanya also expects to stop production at its 12" facility in January in order to prepare migrating to Micron process. Powerchip also may have two-week annual maintenance in January'09. Thus, compared to November, we expect capacity to reduce by 70K 12" wafers in December, another 6 percent down on 12" wafer starts.
The output reductions mentioned above all are just some short term reactions of the DRAM vendors while facing the situation of prices falling below the cash cost this time. The ramp up volume of DRAM will hit the bottom in Q109.
According to DRAMeXchange, while taking the Q208 average monthly ramp up volume as the comparing basis, the Q308 average ramp up volume (in 12" equivalent) only slightly decreased 1.8 percent. Comparing Q408 number to the peak of Q208, the average ramp up volume decreased about 17 percent, and Q109 will decrease about 20 percent.
