Supply Chain Changes We Can Expect in Q3 & Q4
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Inotera, which is also known as Micron Technology Taiwan, has shut down the operation of Fab-2, one of its two fabrication plants in Taiwan’s Taoyuan City, on July 1, due to a malfunction of the nitrogen gas dispensing system that contaminated the wafers and equipment in the facility, according to DRAMeXchange, a division of TrendForce. DRAMeXchange estimates a production capacity loss of around 60,000 wafers out of a previous total of 125,000 wafer starts per month.
DRAMeXchange said the average monthly production capacity of the entire DRAM industry is 1,135K wafer starts in the third quarter. Subtracting the production capacity loss at the Inotera plant, the fab suspension will cut the global DRAM production capacity in July by 5.3 percent. It also will likely result in further price increases.
At this time, DRAM buyers and suppliers are still investigating the extent of the damages, said DRAMeXchange. “The negotiation pertaining to the third-quarter contracts are likely to be affected by some uncertainty over whether the facility can quickly resume operation,” according to the market watcher.
“The temporary shutdown of Fab-2 is expected to aggravate the current undersupply situation in the DRAM market and cause further price increases for memory products,” added DRAMeXchange. “Inotera plans to have Fab-2 resume operation as soon as possible, but the cleaning and the restoration of production capacity will be a time-consuming challenge.”
Inotera produces PC, server and mobile DRAM products. This means a production disruption will have a significant supply impact on all segments of the DRAM market, which has been in a tight supply situation since the second half of 2016.
In addition, DRAMeXchange noted that Inotera is the key manufacturer of Micron’s LPDDR4 products used in Apple’s supply chain for iPhone, which could have an impact on Apple’s upcoming new iPhone devices.
The PC DRAM market has been in an under supply scenario since the second half of 2016, which resulted in price hikes across the board for PC, mobile and server DRAMs. The constrained supply has continued into 2017 due to a lack of investment in production capacity by suppliers, leading to higher tags in the first and second quarters of 2017.
DRAMeXchange reported that some suppliers are “hinting” at additional price hikes. While the long-term effect is still an unknown, DRAMeXchange “expects a tighter squeeze on the supply and strengthening of the current price upswing.”
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