DRAM Outlook to Stay Weak in 3Q as PC DRAM Prices Continue to Slide

Date: 2015-08-30

DRAM outlook to stay weak in 3Q as PC DRAM prices continue to slide and is beginning to dampen prices in Server and Mobile DRAM. While PC DRAM has managed to retain higher margins, our checks indicate that margins are quickly deteriorating with further PC DRAM price declines. PC and Server OEMs are hesitant to add to high levels of DRAM inventory until they see the end of this pricing downtrend. In the long term,Server and PC DRAM pricing should bein line as Server and PC DRAM are interchange able beyond the testing and qualifying process needed for Server DRAM.

Initial numbers point to 2Q15 PC DRAM price decline of 14% q/q. As per DRAMeXchange prices at the end of May, weare down 11% QTD with 4GB DDR3 trading at $24.50 indicating another $1 declineto $23.50 in June. ODM DRAM inventory is above average at around 3 months with our checks indicating that module maker Kingston is already holding on to 4 months of DRAM inventory and unlikely to take more.

In contrast to weak DRAM pricing, the outlook for NAND remains mostly positive with SSD demand driving bit growth and the shift to 3D NAND limiting near term supply growth. This is in line with our view that SSD will account for 40% of NAND bits at theend of 2016. 3D NAND with its better quality and price competitiveness should help create an inflection point for wider adoption of SSDs over the next two years. We expect SSD bits to grow 51% in 2016 largely driven by 25% content growth.


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