DRAM production cut pressures packaging testing

DRAM Market

DRAM production cut pressures packaging, testing

According to DRAMeXchange, prices of DDR2 1Gb eTT chip and DDR2 667 1Gb chip have plunged

Friday, November 21, 2008

TAIPEI, TAIWAN: According to DRAMeXchange, accompanied with the severe DRAM over supply and the global economic slow down, DDR2 1Gb eTT chip price has plunged from the beginning of the year USD1.76 to the current USD 0.92 in 2008, with a 48 percent drop range, and the DDR2 667 1Gb chip drop reached 53 percent.

The DRAM industry has been through nearly two long years of loss and recently, even the chip price fell below the variable cost. DRAM vendors are facing insufficient cash in hand and cash outflow, and now it's a matter of survival or out of the game. From September, vendors such as PSC, Elpida, Hynix, Promos, and Inotera all announced production cut one after another, reaching to a 13 percent production cut. All these again reflect how harsh the DRAM market is for all the players.

While facing the frozen age of DRAM industry, the vendors try to reduce cost, encourage employees to take day offs, and even cut ramp up volumes, to fight against the recession. All these actions affect the back end packaging and testing industry as well.

DRAMeXchange points out that DRAM vendors had asked back end suppliers to lower the cost of packaging and testing. The packing average price has lowered from 0.5 USD in the beginning of 2007 to currently 0.25 USD, with a 50 percent drop. And the testing reduced cost by shortening the testing time, even it's often heard in the market that some eTT are shipped without testing.

As far as the utilization rate is concerned, with the recession of DRAM market, we've seen no more 100 percent utilization rate. From the packaging and testing view point, the utilization rate of packaging has dropped around 30 percent YTD, and the testing utilization rate dropped 40 percent.

Meanwhile, the effect of production cut began from September will start to show in January 2009, and this will put severe pressure on the utilization rate of packaging and testing. From current analysis, the DRAM packaging and testing suppliers can only wait for the downturn to go by and reduce CAPEX to survive. Furthermore, testing suppliers, which are not majorly involved in DRAM business, are trying to get more orders from non-DRAM products, such as logic IC, Flash, etc., to fill up the capacity.

©CIOL Bureau