Hot news drove mild DRAM spot price growth; Synergy of Numonyx spreads built on both vertical and horizontal integration
Published Apr.8, 2008
Hot news drove mild DRAM spot price growth
News flows were quite active last week, after a long period of silence. The major headlines are 1) CEO of Elpida said the company will raise DRAM contract price by 20% in April, 2) Samsung reportedly will have a similar move, 3) about 27-30mn of DRAM chips made by certain Korean vendor were found defective and rejected by customers. Some of the news mentioned above stimulated the DRAM spot price last week. The 1Gb DDR2 eTT chips were back to US$1.76 this Monday because the market participants were unwilling to sell down as prices were already low. Some buyers also turned aggressive as they reacted to the news.
According to our survey, DRAM contract price for the 1HApr so far has not increased. Contract price for the 1GB DDR2 modules ranges from US$16.50 to US$18.50, averaging at US$17.50. Most DRAM vendors are firm on pricing even though customers continue to cut their target price. Because no supplier cuts production despite price is already below variable cost, a firm pricing is their last resort. At the same time, DRAM buyers are installing more DRAM in PCs merely as a promotional tool as most PCs already have more than enough DRAM to support Windows Vista. DRAM buyers now have less incentive to cut DRAM price even though they could since maintaining good future relationship with the vendors is also an issue need to be taken into consideration.
Even though Elpida is not the leading vendor in the contract price market, its production cost of DDR2 1Gb is lower than most competitors, implying that it has a stronger power to survive under weak pricing. When a DRAM vendor, which has stronger power to resist weak pricing, stepped out to call for a healthy pricing mechanism, this highlights how severe the pressure that DRAM vendors are now exposing to. As for the batch of defective chips, they are not yet seen in the spot market.
While DRAM spot prices show bottoming signs, any absence of a meaningful demand will lead to a possible pull back, though the magnitude of drop should be slight. As DRAM demand is set to pick up along with seasonality, we expect gradual price upward movement. As long as the level of DRAM inventory accumulated in 1H08 remains reasonable, price of DDR2 1Gb is likely to go up to US$2 sometime this year.
Synergy of Numonyx spreads built on both vertical and horizontal integration
The memory joint venture of Intel, STMicroelectronics and Francisco Partners, dubbed Numonyx, was officially established this week. Headquartered in Switzerland and incorporated in the Netherlands, Intel and STMicroelectronics each hold respective 45.1% and 48.1% stake at Numonyx. Francisco Partners has also invested US$150mn for a 6.3% stake.
Numonyx marks the integration of Intel's NOR Flash division and STMicroelectronis'NAND Flash division with both generated a combined sales of US$3.6bn in FY07. It will have its initial operation focus places on development and production of non-volatile memory to address demand from a wide array of applications such as digital camera, MP3/PMP player, handset, PC, etc.
Two key businesses of Numonyx are system design and storage-related technology development plus production. In the system design segment, targeted segments cover automobile, consumer electronics, industrial, PC and peripherals, memory card process and wireless communication. Where in the later segment, key products are NAND, NOR, MCP, PCM, memory card (plus software development).
Building on Intel and STMicroelectronics' established foothold in the semiconductor industry, Numonyx is competitive in nature by delivering optimized solutions with competitive cost structure. Numonyx has already started fabrication of NOR Flash on 65nm at 8-inch wafer facility in Singapore. It is expected that advancement to 45nm will be introduced by 2009 for a better cost structure. In addition, the company has also developed new stack memory and packaging technology in attempt to offer product with higher flexibility on smaller package size.
Where for NAND Flash production, Numonyx will mainly carry out the fabrication at its joint venture fabs with Hynix in Wuxi, China, on both 45nm and 55nm. Capacity adjustment at Wuxi fab will be made in accordance with demand and distributed between STMicroelectronics and Hynix in accordance with their stake at the JV.
The competitive edge of Numonyx is not only built on the established foothold of Intel and STMicroelectronics in the memory industry, but also the combined influence in the market, as well as the rich IP library. Currently its IPs cover technologies for NOR, NAND, PCM, processor and packaging. Numonyx will have its fabrication bases spread across facilities Israel, Italy and Singapore. Although some facilities are currently left idle, but the company will adjust its production facilities mixture in accordance with market trend.
Among the bountiful of product developments at Numonyx, PCM (phase-change memory) draws most attention. This is because PCM is more competitive than traditional memory in terms of both power efficiency and data execution performance, as well as delivering bit alterability advantage (to lower different memory types' defects). Pilot production of PCM from Numonyx is slated to begin in early 2009, with volume production to follow in late 2009 or early 2010.
Given that STMicroelectronics and Intel has respective partnership with Hynix and Micron, where SanDisk is also partnering with Hynix, synergy of Numonyx is thereby supported from both a vertical and horizontal integration standpoint. As investment at Numonoyx grows, we expect seeing fellows NAND Flash rivals to diversify their resources and risk following Numonyx’s success.
NAND Flash spot price recap
In the SLG segment, 1Gb price was flat at US$1.78; 2Gb up 0.4% to US$2.61; 4Gb up 1.6% to US$3.75; 8Gb up 1% to US$7.38 and 16Gb down 0.9% to US$16.54. In the MLC segment, 4Gb up 3.2% to US$1.96; 8Gb up 1.2% to US$2.55; 16Gb was flat at US$4.91 and 32Gb down 0.5% to US$10.87. |
