DRAM prices set to enter a period of decline as demand lags supply

Article by: TrendForce

DRAM contract prices are expected to emerge from a bullish period that lasted three quarters and be down in the fourth quarter of 2021 with a quarterly decline (QoQ) of 3-8%, according to TrendForce. This decline can be attributed not only to lower procurement activities by DRAM buyers in the future, but also to lower DRAM spot prices ahead of contract prices.

As buyers and sellers seek to gain the edge in future transactions, the development of the DRAM market in 2022 will be primarily determined by the vendor capacity expansion strategies in conjunction with potential demand growth. . The capacity expansion plans of the three largest DRAM vendors (Samsung, SK hynix and Micron) for 2022 are expected to remain cautious, leading to 17.9% growth in total DRAM bit supply next year. On the demand side, inventory levels are currently relatively high. As a result, the demand for DRAM bits is expected to increase by 16.3% next year and lag behind the growth in the supply of bits. With this in mind, TrendForce predicts that the DRAM market will evolve next year from scarcity to surplus.

Total DRAM Bit Supply Expected to Increase 17.9% in 2022

As buyers increased their DRAM purchases during 1H21 in response to supply chain disruptions, DRAM vendors were able to experience better than expected shipping performance and significantly reduce their inventory levels. These vendors are now optimistic about the growth in demand for DRAM bits generated by the revival of the server market.

In particular, while Samsung and SK hynix have slightly increased their wafer entry for DRAM products, process technologies from DRAM vendors continue to migrate to 1Znm and 1alphanm nodes. TrendForce therefore expects the total supply of DRAM bits to increase by 17.9% year-on-year in 2022.

Most of Samsung’s wafer entry growth takes place in the P2L factory, which houses relatively large physical spaces. As the market leader, Samsung will likely continue to increase the supply of wafers for DRAM products in the future. Growth in the company’s DRAM bit supply for 2022 is expected to reach 19.6%, the highest of the three dominant vendors, despite relatively modest growth in Samsung’s current wafer intake, most of which comes from tech. advanced processing. It’s also worth pointing out that Samsung’s newest P3L is expected to be fully built by mid-2022. P3L will likely contribute a limited amount of DRAM production next year, but will continue to provide additional growth to Samsung’s DRAM supply after 2023.

Considering the bear market for DDR3 memory, SK hynix will likely accelerate the reallocation of wafer capacity from DRAM to logical IC products at its old M10 factory next year. After starting DRAM production at its latest M16 factory this year, SK hynix will see its total DRAM chip production capacity continue to increase in 2022, although the company will also adjust its DRAM output based on market conditions. SK hynix is ​​currently focused on increasing the efficiency rates of its 1Ynm and 1Znm processing technologies, which will contribute to the expected 17.7% increase in SK hynix’s total DRAM bit supply. next year.

The latest expansions of Micron’s A3 plant are primarily undertaken as protection against possible platelet loss during the plant’s upcoming transition to next-generation processing technologies. Therefore, Micron’s total production capacity is unlikely to undergo any drastic changes for the period 2021-2022, and the growth in its DRAM bit output will be primarily due to the increased efficiency of 1Znm and 1alphanm processing technologies. Additionally, DRAM products manufactured with Micron’s 1alpha nm process technology have been widely adopted by customers, and Micron has made the fastest progress in process technology migration among the three largest DRAM vendors. The company is expected to increase its DRAM bit offering by 16.3% next year.

Regarding Taiwanese suppliers, Nanya Tech should finalize the construction of its new fab in 2024, while the new Winbond fab should only start pilot tests at 2:22 am. Taiwanese vendors are therefore expected to make a very limited contribution to increasing the total supply of DRAM bits in 2022.

Demand for DRAM bits will increase by 16.3% in 2022

The smartphone, server, and laptop segments are the top three sources of DRAM consumption. All three product categories experienced considerable growth in 2021, resulting in a high base period for comparison with next year’s figures, meaning significant growth is unlikely. year-on-year production and shipment of these products, and therefore their DRAM consumption, for 2022 takes place. In addition, the continued shortage of components continued to affect various industries and restrict the assembly of devices resulting in lower demand for DRAM as OEM / ODM have a relatively high level of DRAM inventory. For 2022, the demand for DRAM bits is expected to increase by only 16.3% and lag behind the supply of DRAM bits.

As for smartphones, while the shortage of key components such as chipsets and driver ICs remains unresolved, total smartphone shipments for 1Q22, which is already a period of cyclical downturn, will fall below target. expectations. Although the upcoming release of new models is expected to result in a quarterly increase in smartphone production, TrendForce’s current forecast points to an annual production volume of around 1.4 billion units for 2022, a modest growth of 3.5 % year-on-year. This forecast figure will likely be subject to further declines if the shortage of semiconductor components continues. As such, the main driver of mobile DRAM demand growth in 2022 is expected to be the increase in “content per box” (which refers to the total DRAM contained in each individual handset). For 2022, mobile DRAM will account for about 40% of the total DRAM bit consumption; there will also likely be a 15% increase in demand for mobile DRAM bits. This increase represents relatively slow performance, as demand for mobile DRAM has typically grown over 20% year-over-year in previous years.

The server industry has also faced supply chain issues, including interruptions to Southeast Asia-based server assembly operations, as well as shortages of PMICs and passive components. With these issues expected to persist through 2022, total server shipments are expected to increase 4.3% in 2022, primarily driven by the expansion of CSPs data centers. On the other hand, the increase in the market share of Intel Ice Lake processors this year has led DRAM vendors to manufacture more high density (16GB single die) chips due to the growing demand from the server market. for 64 GB modules. Once Intel’s next-generation Xeon server processors, Sapphire Rapids, enter the market next year, the penetration rate of 64 GB server DRAM modules is expected to exceed 60% . As a result, server DRAM bit demand is expected to increase by 20% in 2022, the highest of any DRAM product category.

Annual laptop shipments for 2022 are expected to reach 222 million units, down nearly 7% year-on-year, due to rising vaccination rates in Europe and North America. However, as WFH and distance education become the norm, annual laptop shipments will see some growth in the medium to long term, without falling back to pre-pandemic levels. Although Chromebooks remained the fastest growing product category among all laptops in 1H21, demand for Chromebooks declined steadily in 2H21 due to increased inventory of Chromebooks transported through distribution channels in Canada. response to the high demand for educational laptops in 1H21. Instead, the demand has shifted to commercial laptops, which are equipped with higher DRAM capacity, and this change will persist until 2022. The total demand for PC DRAM bits is expected to increase by more than 15 bits. % next year.

DRAM revenues for 2022 are likely to be mostly stable

Overall, DRAM vendors have performed particularly well this year in terms of bit shipments thanks to the vigorous storage activities of OEMs. The DRAM industry’s total annual revenue is also expected to exceed US $ 90 billion in 2021 due to the rising price trend and growth in bit shipments. However, the DRAM market will begin to see prices drop in 4Q21 and a downtrend accentuating in 1H22. The overall DRAM product ASP for 2022 as a whole is expected to decline 15-20% year-on-year. On the other hand, the year-over-year growth rates of bit shipments from DRAM vendors will also be in a similar range for next year. This means that the growth in bit shipments will mainly offset the lower prices, thus keeping the total DRAM revenue for 2022 at a similar level to this year. Uncertainties remain as to the evolution of DRAM prices during 2H22. If prices manage to recover, total annual DRAM revenues could again reach a new high.

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