Transcript of DE DIOS & ASSOCIATES Focused on our clients’ objectives DRAM MARKET UPDATE March 2013 3/21/13 ©...
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- DE DIOS & ASSOCIATES Focused on our clients objectives DRAM
MARKET UPDATE March 2013 3/21/13 2013 DE DIOS & ASSOCIATES. ALL
RIGHTS RESERVED. Reproduction prohibited without prior permission.
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- DE DIOS & ASSOCIATES Focused on our clients objectives
PC-DRAM March price increases are too steep and can upset the
market balance. - Negative channel profit margins and demand
elasticity can lead to lower spot prices - Buy ahead demand
activity will slow - PC OEM profit margins at risk Evaluating the
risks of a 2H seasonal downturn of PC-DRAM prices - Importance of
perceptions of demand and price momentum PC Market Conditions
3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission. 2
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Revised 2013 bit production growth from 17% to 13-15% - Longer 2Xnm
throughput reduces effective wafer capacity - 2Xnm ramp plateaus in
Feb/Mar Revised demand growth for PCs and servers downward -
Reduced PC-DRAM bit demand growth from 12% to 6-8% due to weaker
Q213 PC builds - Reduced server-DRAM bit demand growth from 27% to
23% due to delay in Ivy Bridge platform release Mobile DRAM
production crosses over PC-DRAM by mid-year - Mobile DRAM 2013
share: 34%, PC-DRAM share: 36% Higher prices and capital spending
can change trend Market Developments 3/21/13 2013 DE DIOS &
ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without
prior permission. 3
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- DE DIOS & ASSOCIATES Focused on our clients objectives Spot
price (channel cost) up 105% from Nov bottom to Mar 18 Run-rate
profit margin down to -2% as of Mar 15 vs. recent high of 23% in
Feb Resale Price up 45% since early Jan to compensate for higher
cost Channel must return quickly to profit margin combination of
higher resale and lower cost How inelastic is demand through
channel? Spot Price Increases & DRAM Channel Margins Branded
Module Cost, Resale & Profit Margin in DRAM Channel (Run Rate
Basis) 3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission. 4
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- DE DIOS & ASSOCIATES Focused on our clients objectives Spot
price can drop 10%-15% to $2.80-$3.00 (4Gb) just above current
equiv. 4GB SODIMM OEM price Further spot price hikes raise risk of
margin squeeze and elasticity Channel prices can cap rate of
PC-DRAM price increase in Q213 Scenario of Return to Positive
Channel Margins DRAM Channel Resale & Spot Price Trend To
Return to Reasonable Profit Margins 23% 0.8% increase or 18 cents
per day 0.8% increase or 23 cents per day Reach resale price of
$31.90 10% up from Mar 18 by Apr 3 Last reached in Aug 11 (42%
margin) 33 cents per day increase since low margins 3/21/13 2013 DE
DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited
without prior permission. 5
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Scenarios and Risks ELASTICITY RISK MARGIN RISK 3/21/13 2013 DE
DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited
without prior permission. 6
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- DE DIOS & ASSOCIATES Focused on our clients objectives OEM
and spot price hit relative parity since steep spot-price increase
Deviation in March Spot price > OEM price Correction of spot
price might cap OEM price increase in April PC-DRAM OEM vs. Spot
Price Trends Trend of OEM and Channel Spot Price $23.40 $24.35
$26.00 $24.65 3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS
RESERVED. Reproduction prohibited without prior permission. 7
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Current DRAM supplier concerns First, will prices drop by mid-year
as in past 3 years? - Market inventory, weak demand If not, will
capital spending increase and boost 2Xnm ramp and bit production
growth? - How much capex and how soon will be effect? - 2Xnm ramps:
faster Hynix, Elpida, Powerchip, Inotera, and Micron Will 2013
Price Trend Break 3-Year Seasonality? Index of PC-DRAM Price/GB
(Base = Jan) 3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS
RESERVED. Reproduction prohibited without prior permission. 8
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Updated Forecast of DRAM Market Conditions ALL DRAM Demand &
Production Trend PC DRAM Demand & Production Trend Potential
D-P Ratio Downward Revision: Weaker Demand, Stronger Production
Inventory release 3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS
RESERVED. Reproduction prohibited without prior permission. 9 Does
not include Inventory and Buy Ahead Activity
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Scenario 1: Estimated DRAM Inventory Est. PC DRAM Supplier
Inventory Trend, 2012-2013 Est. PC DRAM Market Inventory Trend,
2012-2013 OEMs + DRAM Channel Inventory release Buy Ahead Maintain
3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission. 10
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Scenario 1: DRAM Market Conditions ALL DRAM Market Conditions With
Buy Ahead and Inventory Considerations PC DRAM Market Conditions
With Buy Ahead and Inventory Considerations Market Inventory
release Buy Ahead Supplier Inventory release 3/21/13 2013 DE DIOS
& ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited
without prior permission. 11
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Scenario 2: DRAM Market Conditions ALL DRAM Market Conditions With
Buy Ahead and Inventory Considerations PC DRAM Market Conditions
With Buy Ahead and Inventory Considerations Buy Ahead Market
Inventory release 3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS
RESERVED. Reproduction prohibited without prior permission. 12
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Scenario 2: Estimated DRAM Inventory Est. PC DRAM Supplier
Inventory Trend, 2012-2013Est. PC DRAM Market Inventory Trend,
2012-2013 OEMs + DRAM Channel Inventory release Buy Ahead 3/21/13
2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED. Reproduction
prohibited without prior permission. 13
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Forecast of 4GB SODIMM Price Scenario 1 Forecast of 4GB SODIMM
Price, US$ Forecast of 4GB SODIMM Operating & Cash Margins CASH
MARGIN OPERATING MARGIN 10%-27% Q213 25%-35% Q413 Boost Capex
3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Impact of PC-DRAM Price Forecast Average DRAM Cost/PC and its % of
PC BOM PC-DRAM Spend, Millions of USD 3/21/13 2013 DE DIOS &
ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without
prior permission. 15
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- DE DIOS & ASSOCIATES Focused on our clients objectives
PC-DRAM Price Tables 3/21/13 2013 DE DIOS & ASSOCIATES. ALL
RIGHTS RESERVED. Reproduction prohibited without prior permission.
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- DE DIOS & ASSOCIATES Focused on our clients objectives DRAM
Industry Financial Trends 3/21/13 DRAM Operating Profit, 2006-2013
Millions of US$ 2013 is a forecast. DRAM Revenue and Capital
Spending, 2004-2013 20% 19%. 22%. 42%. 67%. 49%. 58%. 44% of
Revenue. 2013 DE DIOS & ASSOCIATES. ALL RIGHTS RESERVED.
Reproduction prohibited without prior permission. 17
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Revised server DRAM demand growth down to 23% - Delayed and slow
releases of Ivy Bridge platforms DRAM demand at parity w/
production in Q213 and above production in 2H13 - Server DRAMs feed
off the production line, not inventory - Compete with profit
margins of PC & mobile DRAMs Short term 4Gb supply issues due
to mobile and GDDR5 demand 8GB and 16GB RDIMM prices likely to be
higher than previous forecast to compete against PC and mobile
allocations 3/21/13 2013 DE DIOS & ASSOCIATES. ALL RIGHTS
RESERVED. Reproduction prohibited without prior permission. 18
Major Server DRAM Developments
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- DE DIOS & ASSOCIATES Focused on our clients objectives 8GB
2Rx4 RDIMM Prices Scenario 1 3/21/13 2013 DE DIOS & ASSOCIATES.
ALL RIGHTS RESERVED. Reproduction prohibited without prior
permission. 19 Forecast of 2Gb-based 8GB RDIMM Prices Operating
Margins: 8GB 2R RDIMM v. 4GB SODIMM
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- DE DIOS & ASSOCIATES Focused on our clients objectives 16GB
& 32GB RDIMM Prices Scenario 1 3/21/13 2013 DE DIOS &
ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without
prior permission. 20 Forecast of 16GB RDIMM Prices vs. other RDIMMs
Operating Margins: 8GB 2R RDIMM v. 16GB RDIMM
- Slide 21
- DE DIOS & ASSOCIATES Focused on our clients objectives The
Premium for Performance & Chipkill 3/21/13 2013 DE DIOS &
ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without
prior permission. 21 Premium for System Memory Bandwidth &
ChipkillComparison of Supplier Operating Margins
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- DE DIOS & ASSOCIATES Focused on our clients objectives
RDIMM Price Tables 3/21/13 2013 DE DIOS & ASSOCIATES. ALL
RIGHTS RESERVED. Reproduction prohibited without prior permission.
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Strong smartphone DRAM demand but growth rate slowing in 2H 2013 -
Inventory correction of low-cost China smartphones Tablet memory
core shifting to 40% of bit shipments - Competition from DDR3L-RS
Mobile DRAM Market Developments 3/21/13 2013 DE DIOS &
ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without
prior permission. 23
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Smartphone DRAM Demand Trend 3/21/13 Components of Smartphone DRAM
DemandGbit Demand from Smartphones 17% Q/Q 23% Q/Q 12% Q/Q 26% Q/Q
54% Q/Q 5% Q/Q 10% Q/Q 11% Q/Q 37% Q/Q 22% Q/Q 2013 DE DIOS &
ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited without
prior permission. 24
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- DE DIOS & ASSOCIATES Focused on our clients objectives
Limited Sources of S-Phone DRAM Demand Growth 3/21/13 2013 DE DIOS
& ASSOCIATES. ALL RIGHTS RESERVED. Reproduction prohibited
without prior permission. 25
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- DE DIOS & ASSOCIATES Focused on our clients objectives
In