TrendForce: The chips are still down for DRAM
The SK Hynix fire is still impacting contract prices. The most affected customers will be the second and third tier customers as SK Hynix will prioritise supplying its wafers to the firm's top tier customers
On September 4th 2013, a fire engulfed a substantial portion of SK Hynix's production plant in Wuxi, China.
This has since had a major impact on dynamic random access memory (DRAM) prices.
SK Hynix is the world's second-largest maker of DRAM chips and supplying stalwarts such as Apple, Dell, Lenovo and Sony has caused a continuous contract price uptrend. The Wuxi plant produced between a tenth and a sixth of the world's supply of DRAM memory chips which are used in all computing electronics from laptop computers to mobile phones.
According to DRAMeXchange, a research division of TrendForce, the highest price for the mainstream 4GB modules reached $US 34 in the first half (1H') of October 2013. And they are still on the increase.
The price represents an estimated 6.25% increase compared to the amount observed in September.
Calculating on the basis of the aforementioned figure, the 4Gb chip price translates to approximately $US 3.94, close to the $US 4 mark, and only 8% lower than the highest 4Gb chip price in the spot market ($US 4.25). But good news for the biggest SK Hynix customers is that for the second half of October, the difference between the contract price and spot price is expected to grow smaller.
The overall impact that SK Hynix's Wuxi plant fire has on first tier PC-OEMs does not appear to be overly significant. This is partly because the Korean company generally prioritises providing the majority of its supplies to these OEMs.
The second and third tier PC OEMs, on the other hand, are gradually feeling the impacts of the supply shortages. With such a trend continuing, the spot prices are unlikely to drop anytime soon.
Even though SK Hynix is currently intensifying its efforts to recover lost production and is looking to resume wafer production in November, the main production supplies intended for the market will not be ready until either December or the beginning of 2014. The Q4 pricing movements, for the most part, are still expected to be influenced by the supply shortages in October and November.
Samsung Seeking to Reclaim PC DRAM Market following SK Hynix's Fire
The fire incident at SK Hynix's Wuxi plant has caused the production of nearly 130K wafers to be halted on a monthly basis. This has in turn led to a 40% increase in spot prices and the monthly growth in the contract pricing market.
The contract prices have already managed to reach close to the $US 35 mark as of 1H'October. Under the aforementioned developments, two Korean manufacturers, Samsung and are taking action to protect their status within the PC DRAM market.
Samsung has begun to make necessary adjustments to enhance its PC DRAM market share by increasing the PC DRAM production in its Line 12 and Line 16 plants. In attempting to compensate for lost production following the fire accident, SK Hynix increased the utilisation rate in both its M10 and M12 plants, and has made an effort to allocate parts of its NAND Flash capacity to DRAM.
According to TrendForce's estimates, the combined total of the two aforementioned companies' added production is between 100K - 120K per month, which is roughly equivalent to the original capacity at the Wuxi plant. By the end of Q4, both Samsung's and SK Hynix's added wafer output levels are likely to reach a maximum, with the main production set to begin in 1Q14 and expected to make up for the losses from the fire.
With regard to the new Micron group, given that its production is relatively unaffected by the fire accident.
Its Singapore Tech plant will continue to allocate DRAM capacity to NAND Flash, whereas its Hiroshima plant will ramp up the production of mobile DRAM in order to satisfy the demands of its major clients.
While the level of DRAM production has increased in Micron's Taiwan group (Rexchip), this strategy has reportedly been implemented before the fire accident, and no changes have apparently been made.
TrendForce believes that even if the relevant DRAM production is increased, the impact will only be noticeable during the end of Q4 and the beginning of 2014. In the near term, neither the production shortage situation nor the price uptrend is expected to change anytime soon.
