Taiwan Nightmare: DRAM Industry into Vicious Depreciation Circle

Nobody have ever thought 2011 years DRAM industry is facing harder winter more than 2008 years, not only offer again crash, and the global economic uncertainty time is longer, Taiwan DRAM factories are facing to cut production. In the short term, it indeed stimulated ex-stock price stop dropping, but in long term perspective, the personal computer (PC) terminal low demand is the killer to make DRAM industry into a vicious circle of depreciation.

Different from the reduction of 2008, the international leaders also joined in, while in 2011, it only suffered the Taiwan factories. And the obvious is the boom in 2009, so far, the real physical recovery from the weak is in fact only international companies, Taiwan factory at that time only benefit from destruction, but it hurt Taiwan factory’s competitiveness.

Even though Elpida first announced to cut production, Samsung Electronics and Hynix, the Korean giant which accounts for more than 60% of global DRAM industry, then showed that they won’t follow up to cut production. On the one hand, it forced other trade expanded reduction range, on the other hand because Samsung and Hynix have a broader product line, they have put most of the PCDRAM to do other products, so PCDRAM crash affected lesser.

After Elpida implied the cut of production, it only put CDRAM on WaferBank temporary not packaging and testing, the cut is not shipment but shipments of quantity, and it is thought that it has limited help to industrial essence. However, after the PSC announced it will cut 50% of the PCDRAM production, the market is beginning to be presented this phenomenon.

At present the whole 12 inches wafer factory capacity of PSC is 120000 pieces, from March 2011 it announced to withdraw from PCDRAM brand sales, and transfer to be the Elpida OEM, PSC set out to increase the other OEM product capacity share.

According to the assessment of PSC, The reason that it cut the PCDRAM capacity in large degree is it doesn’t want to take the cash outflow pressure, on the other hand is also benefits from OEM orders, including LCD Driver IC, CMOS Sensor IC, power management IC, their own NAND Flash IC and other products, all have the urgent order effect, it can survive in 12 inches wafer factory capacity, thus reduce the amount of PCDRAM shots won’t hurt a lot.

In whole, the production cut of DRAM factory is given priority to Taiwan factories, the main factors are financial pressure, process technology, the product range shortage.

The wave of Taiwan factory production cut effect can maintain at least 3 months that the offer won’t break DRAM lows, but it is human reason cutting production and shipment, which is not driven by the really needs. According to historical experience, in fact, every time a DRAM offer break away from the bottom is artificial reduction, it must cooperate with the fundamentals of business environment, can rise really back to industry, or the price of order all rallied will only be a flash in the pan.

The global economic environment is still not stable, the European debt problem at present only have resolved temporarily, but it is difficult to really reach the whole event end, it should closely observe the variation of economic environment.