Obsolescence Insurance, a New High-Margin Business for EMS Companies
by 
Thanks to DRAM manufacturers reallocating manufacturing capacity from PC DRAM to server DRAM and mobile DRAM production due to more stable prices and higher margins, revenue in the global DRAM industry only fell 1.2 percent in the third quarter of 2015, according to the latest analysis from DRAMeXchange, a division of TrendForce.
As a result, the share of mobile DRAM expanded from 33.7 percent in the second quarter to 40 percent in the third quarter. With increased smartphone shipments forecast for the fourth quarter – up 3.7 percent from the third quarter – DRAMeXchange expects the greater demand for mobile DRAMs will “limit the decline of its average selling price to within five percent during the fourth quarter,” stated Avril Wu, assistant vice president at DRAMeXchange, a division of TrendForce.
However, the market researcher reports that DRAM ASPs will continue to fall due to continued market oversupply.
“The share of mobile application in the overall DRAM production will increase corresponding to the growth of smartphone shipments in the fourth quarter,” stated Wu. “However, the market will be affected by negative seasonal headwinds in the following period. Manufacturers will also increase the bit supply by producing on the 20/21nm processes. Thus, the oversupply problem will worsen and DRAM prices will continue to decline in the near future.”
This means stable pricing for mobile DRAMs won’t last. Due to seasonal trends in the first half of 2016, mobile DRAM pricing will again face quarterly price declines of about six to eight percent due to lower demand and increased supply,” Wu said.
“Dominant suppliers are pushing their costs down, aggravating the supply-demand imbalance and keeping margins low,” added Wu.
But suppliers continue to move ahead with new technologies. Wu reported that Samsung’s 20-nm production in the third quarter included PC and server products as well as LPDDR4 mobile DRAM. “By becoming the first manufacturers to supply LPDDR4 made on the 20-nm process, Samsung will have significant cost advantage as the market is experiencing falling prices,” she said.
In addition, SK Hynix has provided 21-nm samples to customers and mass production is expected to begin in the first or second quarter of next year, said Wu. “The 21 nm will likely make a major contribution to the manufacturer’s overall production.”
However, Micron is lagging behind. “Micron is the furthest behind in technology as its 20-nm process is making small batches of server DRAM and samples of PC DRAM (which will later be verified by clients),” Wu stated.
As next-generation mobile memory – LPDDR4 made on 21/20-nm processes – becomes mainstream by the end of 2016, “the surge in its supply will inevitably increase the downward pressure on mobile DRAM prices,” added Wu.
Related posts
