DRAM buyers were aggressively stocking up during 1H21 because quotes began to rise at the start of the year, and there were concerns about shortages in the supply chain, according to TrendForce’s latest investigations. To avoid the risk of a supply crunch, most DRAM buyers kept raising their demand until the middle of the year. Moving into this second half of the year, the COVID-19 pandemic has exacerbated component gaps, the adverse effect of which on OEMs’ ability to assemble their end products has widened as well. Due to having a glut of memory and a shortage of other key components, some OEMs have opted to scale back DRAM procurement. PC OEMs have especially become noticeably restrained in this regard. Fortunately, the server-related segment of the market has been propping up the overall demand; and because of this, most DRAM suppliers were able to post a marginal growth in shipments for 3Q21. Additionally, quotes for DRAM product also kept rising in 3Q21. On account of these factors, the quarterly total DRAM revenue rose again by 10.2% QoQ to US$26.6 billion for 3Q21.

Regarding 4Q21, DRAM buyers that are already carrying a high level of inventory will probably adopt an even more conservative stance, as OEMs are still affected by component gaps in the supply chain while also preparing for stock-taking at the end of the year. Without adequate demand for support, DRAM prices on the whole are going to make a downward turn in 4Q21 and thereby end this short three-quarter period of cyclical price upturn. Also, since 4Q21 is going to be the first quarter in the general downtrend in quotes, buyers anticipate further price reductions in the future and are more reluctant to stock up in the near term. Declines in quotes will continue to widen as a result. With demand shrinking and prices falling, the DRAM industry will inevitably experience a drop in revenue as well.

DRAM suppliers saw higher profits in 3Q21 because of rising prices and growth in output shares of more advanced process technologies

Looking at the performances of individual DRAM suppliers for 3Q21, the three dominant suppliers all had positive revenue growth but diverged slightly in bit shipments. Samsung and Micron posted a small QoQ increase in their respective bit shipments, whereas SK hynix posted a small QoQ drop. The rise in quotes was able to offset the weakening momentum in bit shipments, so the top three suppliers managed to again raise their revenues from the previous quarter. Samsung’s, Sk hynix’s, and Micron’s QoQ revenue growth rates came to 11%, 8%, and 12% respectively. While their growth rates were still around the 10% level, they were more modest compared with the previous quarter. In the ranking by revenue market share, Samsung remained at the top with its market share expanding further to 44%. SK hynix and Micron were still at second and third place respectively. The former’s market share shrank a bit to 27.2% due to the decline in bit shipments, whereas the latter’s market share grew slightly to 22.9%.

In terms of profitability, 3Q21 saw continuing improvements thanks to rising quotes and growth in the output shares of the more advanced process technologies. Samsung raised its operating margin to 53% in 3Q21 as the share of 1Z nm products in its output kept growing. As such, Samsung’s operating margin reached almost to the high of nearly three years ago. Likewise, SK hynix’s operating margin grew to 47% in 3Q21 because of the increase in the output share of 1Z nm products. As for third-largest supplier Micron, the increase in its ASP for its latest fiscal quarter (June to August) is similar to the increases in the two South Korean suppliers’ respective ASPs for 3Q21. Its operating margin also rose to 42% for this period. Moving into 4Q21, TrendForce expects the slide in DRAM prices to be an inescapable trend. Whether individual suppliers will be able to maintain a high level of profitability depends on their own progress in process migration and yield rate improvement.

While the specialty DRAM market weakened in 3Q21, Taiwanese suppliers trailed closely behind the three dominant suppliers

Compared with mainstream DRAM products, specialty DRAM underwent a higher magnitude of price hikes in 1H21. Hence, as demand for TVs and other consumer electronics fell in 3Q21, and supply chain disruptions persisted, clients in turn reduced their DRAM procurement. This reduced demand indirectly impacted the revenue performances of Taiwanese suppliers, which primarily target the consumer electronics market. Nanya Tech continued to raise its quarterly ASP in order to offset weak shipment. The company’s revenue increased by about 6% QoQ in 3Q21, while its operating profit margin also increased from 31.2% in 2Q21 to 38.1% in 3Q21 due to the price hike. Winbond benefitted from high demand for its low-density (1/2Gb) products and recorded a nearly 13% QoQ increase in DRAM revenue in 3Q21. Among all Taiwanese suppliers, Winbond registered the strongest revenue growth during the quarter.

Nevertheless, TrendForce’s investigations also find that the physical spaces within the two aforementioned Taiwanese suppliers’ fabs are now fully occupied, meaning the suppliers are unable to install additional equipment in these fabs before building new fabs. Hence, these suppliers’ financial performances will be heavily impacted by their ASPs in the short run. For instance, Nanya Tech’s new facilities will not contribute to DRAM production until construction finalizes in 2024. In the short run, Nanya Tech is able to slightly increase its DRAM bit shipment only through migrating to the advanced 1A/1B nm process technologies. Similarly, Winbond will be able to continue expanding its production capacity only after its new fab located in Luzhu, Kaohsiung kicks off mass production in 2H22. As for PSMC, its revenue from sales of PC DRAM products manufactured in-house increased by about 6% QoQ in 3Q21. However, PSMC’s total revenue from both sales of in-house DRAM and its DRAM foundry business increased by 12% QoQ in 3Q21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

DRAM contract prices are likely to exit a bullish period that lasted three quarters and be on the downswing in 4Q21 at a QoQ decline of 3-8%, according to TrendForce’s latest investigations. This decline can be attributed to not only the declining procurement activities of DRAM buyers going forward, but also the drop in DRAM spot prices ahead of contract prices. While the buying and selling sides attempt to gain the advantage in future transactions, the DRAM market’s movement in 2022 will primarily be determined by suppliers’ capacity expansion strategies in conjunction with potential growths in demand. The capacity expansion plans of the three largest DRAM suppliers (Samsung, SK hynix, and Micron) for 2022 are expected to remain conservative, resulting in a 17.9% growth in total DRAM bit supply next year. On the demand side, inventory levels at the moment are relatively high. Hence, DRAM bit demand is expected to grow by 16.3% next year and lag behind bit supply growth. TrendForce therefore forecasts a shift in the DRAM market next year from shortage to surplus.

Total DRAM bit supply is projected to grow by 17.9% in 2022 in light of DRAM suppliers’ low inventory levels and resurging demand in the server market

As buyers expanded their DRAM procurement in 1H21 in response to supply chain disruptions, DRAM suppliers were able to register better-than-expected shipment performances and reduce their inventory levels considerably. These suppliers are now bullish on the growth of DRAM bit demand generated by the resurging server market. In particular, while Samsung and SK hynix have marginally increased their wafer input for DRAM products, DRAM suppliers’ process technologies are continuing to migrate towards the 1Z nm and 1alpha nm nodes. TrendForce therefore expects total DRAM bit supply to increase by 17.9% YoY in 2022.

Most of Samsung’s wafer input growth takes place in the P2L fab, which houses relatively large physical spaces. As the prevailing market leader, Samsung will likely continue to increase wafer input for DRAM products going forward. The company’s DRAM bit supply growth for 2022 is expected to reach 19.6%, the highest out of the three dominant suppliers, despite the relatively modest growth in Samsung’s current wafer input, most of which comes from advanced process technologies. It should also be pointed out that Samsung’s newest fab P3L is expected to be fully built by mid-2022. P3L will likely contribute to DRAM production by a limited amount next year but continue to provide further growth for Samsung’s DRAM supply after 2023.

Given the bear market for DDR3 memory, SK hynix will likely speed up the reallocation of wafer capacity from DRAM to logic IC products at its old M10 fab next year. After kicking off DRAM production at its newest M16 fab this year, SK hynix will see its total production capacity for DRAM chips continue expanding in 2022, although the company will also adjust its DRAM output according to the state of the market. SK hynix is currently focused on raising the yield rates of its 1Y nm and 1Z nm process technologies, which will contribute to the forecasted 17.7% increase in SK hynix’s total DRAM bit supply next year.

The latest expansions at Micron’s A3 fab are primarily undertaken as a safeguard against possible wafer losses during the fab’s upcoming transition to next-gen process technologies. Hence, Micron’s total production capacity will unlikely undergo drastic changes for the 2021-2022 period, and growths in its DRAM bit output will be mostly derived from the increased yield of the 1Z nm and the latest 1alpha nm process technologies. In addition, DRAM products manufactured with Micron’s 1alpha nm process technology have been widely adopted by clients, and Micron has been making the fastest progress in terms of process technology migration among the three largest DRAM suppliers. The company is expected to increase its DRAM bit supply by 16.3% next year.

Regarding Taiwanese suppliers, Nanya Tech is expected to finalize the construction of its new fab in 2024, while Winbond’s new fab is expected to kick off only pilot runs in 2H22. Taiwanese suppliers are therefore expected to make very limited contributions to the increase in total DRAM bit supply in 2022.

DRAM bit demand is expected to increase by merely 16.3% in 2022, as the bear market for various products results in a high base period in 2021

The smartphone, server, and notebook computer segments comprise the three largest sources of DRAM consumption. All three product categories have been seeing tremendous growth in 2021, thereby resulting in a high base period for comparison against next year’s figures, meaning that significant YoY growths in these products’ production and shipment, and subsequently their DRAM consumption, for 2022 are unlikely to take place. Furthermore, the ongoing shortage of components has continued to affect various industries and constrain device assembly, leading to a decline in demand for DRAM, since OEMs/ODMs are carrying a relatively high level of DRAM inventory. For 2022, DRAM bit demand is expected to increase by only 16.3% and lag behind DRAM bit supply.

Regarding smartphones, while the shortage of key components such as chipsets and driver ICs remains unresolved, total smartphone shipment for 1Q22, which is already a period of cyclical downturn, will fall below expectations. Although the upcoming release of new models is expected to bring about quarterly increases in smartphone production, TrendForce’s current forecast indicates an annual production volume of about 1.4 billion units for 2022, a modest 3.5% YoY growth. This forecasted figure will likely be subject to additional declines if the shortage of semiconductor components extends further. As such, the main growth driver of mobile DRAM demand in 2022 is expected to be the increase in “content per box” (which refers to the total DRAM contained within each individual handset). For 2022, mobile DRAM will account for approximately 40% of total DRAM bit consumption; there will likely be a 15% increase in mobile DRAM bit demand as well. This increase represents a relatively sluggish performance, as mobile DRAM demand generally increased by more than 20% YoY in previous years.

The server industry likewise faced supply chain-related issues, including disruptions in server assembly operations based in Southeast Asia, as well as shortages of PMICs and passive components. With these issues projected to persist through 2022, total server shipment is expected to increase by 4.3% in 2022, primarily thanks to CSPs’ data center expansions. On the other hand, the rise in Intel Ice Lake CPUs’ market share this year has led DRAM suppliers to manufacture more high-density dies (16Gb mono die) due to the server market’s surging demand for 64GB modules. Once Intel’s next-gen Xeon server CPUs, Sapphire Rapids, enter the market next year, the penetration rate of 64GB server DRAM modules is expected to surpass 60%. Hence, server DRAM bit demand is projected to increase by 20% in 2022, the highest among all DRAM product categories.

Annual shipment of notebook computers for 2022 is projected to reach 222 million units, a nearly 7% YoY decrease, owing to increased vaccination rates in Europe and North America. However, as WFH and distance education become the norm, annual notebook shipment will undergo some growth in the medium to long term, without falling back down to pre-pandemic levels. Although Chromebooks remained the fastest-growing product category among all notebooks in 1H21, demand for Chromebooks has been steadily declining in 2H21 due to the increased Chromebook inventory carried by distribution channels in response to high demand for educational notebooks in 1H21. Instead, demand has shifted to commercial notebooks, which are equipped with more DRAM capacity, and this shift will persist through 2022. Total PC DRAM bit demand is expected to increase by more than 15% next year.

DRAM revenue for 2022 will likely be mostly flat as bit shipment growth offsets decline in quotes

On the whole, DRAM suppliers have performed exceptionally well this year in terms of bit shipments thanks to OEMs’ energetic stock-up activities. The annual total revenue of the DRAM industry is also projected to surpass US$90 billion in 2021 because of the price uptrend and the growth in bit shipments. However, the DRAM market will begin to see prices falling in 4Q21 and a sharpening downtrend in 1H22. The overall ASP of DRAM products for the whole 2022 is projected to register a YoY drop of 15-20%. On the other hand, the YoY growth rates of DRAM suppliers’ bit shipments will also be within a similar range for next year. This means that the bit shipment growth will mostly offset the price decline, thereby keeping the total DRAM revenue for 2022 at a similar level to this year. There are still uncertainties as to the movements of DRAM prices during 2H22. If prices manage to rally, then the annual total DRAM revenue may again reach a new high.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

Following the peak period of production in 3Q21, the supply of DRAM will likely begin to outpace demand in 4Q21, according to TrendForce’s latest investigations (the surplus of DRAM supply is henceforth referred to as “sufficiency ratio”, expressed as a percentage). In addition, while DRAM suppliers are generally carrying a healthy level of inventory, most of their clients in the end-product markets are carrying a higher level of DRAM inventory than what is considered healthy, meaning these clients will be less willing to procure additional DRAM going forward. TrendForce therefore forecasts a downward trajectory for DRAM ASP in 4Q21. More specifically, DRAM products that are currently in oversupply may experience price drops of more than 5% QoQ, and the overall DRAM ASP will likely decline by about 3-8% QoQ in 4Q21.

PC DRAM prices are expected to decline by 5-10% QoQ as market demand for notebook computers weakens

Although WFH and distance learning applications previously generated high demand for notebook computers, increasingly widespread vaccinations in Europe and North America have now weakened this demand, particularly for Chromebooks. As a result, global production of notebooks is expected to decline in 4Q21, in turn propelling the sufficiency ratio of PC DRAM to 1.38%, which indicates that PC DRAM will no longer be in short supply in 4Q21. However, PC DRAM accounts for a relatively low share of DRAM manufacturers’ DRAM supply bits, since these suppliers have allocated more production capacities to server DRAM, which is in relatively high demand. Hence, there will unlikely be a severe surplus of PC DRAM in 4Q21. It should also be pointed out that, on average, the current spot prices of PC DRAM modules are far lower than their contract prices for 3Q21. TrendForce therefore expects an imminent 5-10% QoQ decline in PC DRAM contract prices for 4Q21, with potential for declines that are even greater than 10% for certain transactions, as PC OEMs anticipate further price drops in PC DRAM prices in the future.

Server DRAM prices are expected to decline for the first time this year, by 0-5% QoQ due to high client-side inventory

CSPs in North America and China currently carry more than eight weeks’ worth of server DRAM inventory, with some carrying more than 10 weeks’ worth of inventory, as they procured massive amounts of server DRAM in the previous two quarters to avoid shipment issues with whole server units caused by component shortages. In view of this aggressive procurement effort, the overall demand for server DRAM has gradually slowed, although certain Tier 2 data centers are still procuring server DRAM to make up for previous gaps. As server DRAM buyers continue to gravitate towards destocking their server DRAM inventory in 4Q21, demand will likely fall short of the previous quarters. Furthermore, due to long lead times for certain key components, shipment of whole servers is also expected to undergo quarterly declines. On the supply side, the three major DRAM suppliers (Samsung, SK hynix, and Micron) reallocated some of their production capacity for mobile DRAM to server DRAM in early 2Q21, and this reallocated capacity is expected to gradually begin outputting server DRAM in 4Q21. Given the slowdown in server DRAM demand, contract negotiations for server DRAM procurement in 3Q21 lasted until early August. Although server DRAM contract prices underwent a 5-10% QoQ increase in 3Q21 due to suppliers’ best attempts during contract negotiations, further price hikes going forward are unlikely. TrendForce expects server DRAM prices to undergo a decline for the first time this year in 4Q21 with a QoQ drop of 0-5%.

Mobile DRAM prices are expected to remain relative unchanged from 3Q21 levels despite a possible price drop ahead of time at the end of the year

In light of fluctuations in the COVID-19 pandemic, the global demand for smartphones and the supply of smartphone components are both still at the risk of experiencing declines. In addition, after smartphone brands revised down their production targets at the end of 2Q21, brands and distributors alike have been facing the pressure of high smartphone inventory levels. In response to factors such as pandemic-related uncertainties and declines in mobile DRAM prices for 2022, smartphone brands will slow down their mobile DRAM procurement and prioritize inventory reduction instead. Hence, bit demand for mobile DRAM will decline even further in 4Q21. On the whole, given the uncertain state of the pandemic in the coming winter, smartphone brands will adopt a more conservative attitude towards both smartphone production and component procurement in 4Q21. As a result, even if DRAM suppliers are willing to lower mobile DRAM prices, such an effort will only result in limited sales growths. In addition, mobile DRAM still lags behind other DRAM product categories in terms of profitability, meaning a drop in mobile DRAM prices is unlikely. Taking these factors into account, TrendForce expects prices of discrete DRAM, eMCP, and uMCP to mostly hold flat in 4Q21 compared with 3Q21.

It should be noted that, by the end of the year, DRAM suppliers may potentially start supplying mobile DRAM at 1Q22 prices ahead of time, primarily for two reasons: First, DRAM suppliers will be faced with revenue performance pressures at the end of the year; second, smartphones and DRAM suppliers will enter into new LTAs (long term agreements) for 2022. These factors are expected to impact mobile DRAM ASP for 4Q21 and bring about a price drop ahead of time.

Graphics DRAM contract prices are expected to decline by 0-5% QoQ due to excess supply

Market demand for discrete graphics cards and notebook graphics cards still remains due to the stable market for commercial notebooks and the resurging cryptocurrency mining market, which saw cryptocurrency prices rebounding from rock bottom levels within the past two months. However, severe issues with the availability of components in the graphics card supply chain currently present the most significant bottleneck in graphics card production. In particular, components such as driver IC, PMIC, and other peripheral components are all in shortage, while graphics DRAM is in relative oversupply compared to these other components. Graphics card manufacturers are therefore revising down their graphics DRAM procurement. Consequently, even though DRAM suppliers have not significantly increased their graphics DRAM production, demand from the purchasing end will remain sluggish until the shortage of other components is resolved. Demand for graphics DRAM will unlikely see a resurgence before the end of 2021. On the supply side, the three major DRAM suppliers are primarily focused on GDDR6 for their current graphics DRAM production. As well, graphics card demand from the cryptocurrency mining market is generally aimed at newer graphics cards that feature GDDR6 memory. Accordingly, both production and sales of GDDR5 memory are relatively weak, and this bearish trend is especially reflected in spot prices. As spot prices are the first to enter a downturn, and the aforementioned market conditions lead to sluggish procurement activities, graphics DRAM prices are in turn expected to plummet from previous levels in 4Q21, although this decline is projected at a minor 0-5% QoQ owing to DRAM suppliers’ efforts to keep prices constant.

QoQ decline of DDR4 Consumer DRAM prices is expected to be among the highest drops, at 5-10% as procurement activities decelerate

Gradual easing of lockdowns in Europe and North America has led to a decline in consumer spending on home entertainment applications. This, along with the severe shortage in electronic components, has adversely affected the demand for consumer electronics, such as TVs, STBs (set-top boxes), and networking devices, as well as industrial-use products, thereby also reducing the procurement demand for consumer DRAM. On the other hand, while DRAM suppliers were in the process of transitioning from DDR3 manufacturing to other products, the massive price hike of DDR3 products in 1H21 led DRAM suppliers to slow this transition. Even so, certain market conditions are now placing downward pressure on DDR3 prices, so next year the three major suppliers may potentially speed up the transition of mature DDR3 manufacturing to other products, such as CMOS image sensors or other logic ICs, instead. As server and PC manufacturers’ DRAM inventory level rises, contract prices of those DRAM products will likely decline in 4Q21. Thus, given that the movement of DDR4 consumer DRAM prices is highly correlated with PC DRAM and server DRAM and has been trending relatively high, DDR4 consumer DRAM prices are expected to decline by 5-10% QoQ in 4Q21. Likewise, although the supply of DDR3 consumer DRAM has been gradually decreasing, DDR3 consumer DRAM prices will also undergo an overall decline, particularly for 4Gb chips. DDR3 consumer DRAM prices are expected to decline by 3-8% QoQ in 4Q21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com