Channel caution urged as analyst predicts memory constraints
Chinese fab fire may have repercussions for next year despite plans to reopen this month
A US analyst has warned today that DRAM contract prices are still expected to rise and supply to be affected as a result the SK Hynix fire on 4 September.
That's despite the fab operator's assertions that the plant will reopen early this month, and few reports of inventory problems in the channel.
Avril Wu, an analyst and assistant vice president at TrendForce research division DRAMeXchange, said there remain "uncertainties" about the recovery period following the Wuxi plant fire.
"The price uptrend is expected to persist in spite of the economic downturn and the market's underwhelming peak quarter performances," Wu wrote today.
September DRAM contract prices alone rose by nearly 15 per cent – making for a total rise of around 35 per cent since the fire – and this would hike further in October and November, she said.
NAND pricing could also be pushed higher -- especially as the plant recently decided to focus more on NAND.
Meanwhile, US investment bank Piper Jaffray has also reported that it expects the fire to have an effect on pricing and supply until next year.
TrendForce's Wu added that some module supplies from the PC-OEMs were still available at US$29, given that quarterly deals had been settled in Q3.
"Throughout October and November, TrendForce projects the price increases will be more significant as the details concerning SK Hynix's fire accident are clarified and as the manufacturers' inventories drop more noticeably," she said.
Gerard Marlow, general manager for business development at storage specialist Hammer, said he had not yet seen supply problems in the channel as a result of the Hynix fire. However, he advised resellers, and integrators in particular, to assess their needs and take care they have enough DRAM on hand in advance.
"The significant price peaks we saw in the first week or so since the fire seem to have abated, but we are still seeing prices increase in the region of 30 per cent between now and then," Marlow said.
"But it's a very fluid situation, so I think the advice for the channel, particularly if you're doing integration, is to be sure you have enough in house. If you're a reseller, maybe it's not so significant."
Agreed mainstream 4GB prices have so far risen 14.3 per cent to US$30 on average. Based on the average US$30 price for the 4GB modules, the average 4GB price is estimated to be around US$3.44 – 20 per cent lower than the US$4.1 price in the spot market. However, contract and spot price differences will likely shrink over time.
Wu said that PC OEM module inventories are getting "noticeably" smaller, and more buyers are sourcing product in advance as a result of the fire, which has affected the prices of graphics and server DRAM as well.
Ken Kuo, another analyst at DRAMeXchange, warned on Friday that many manufacturers still do not keep a stock of graphics-based memory products in case of emergency.
"Sources have already indicated that the recovery period for the Wuxi plant will take as long as three months to half a year. Thus, from 4Q13 to 1Q14, the market supplies are expected to remain tight," Kuo said.
Several days after the fire, as reported on ChannelWeb on 6 September, some memory manufacturers supplied by SK Hynix were understood to have suspended UK partner orders, only taking orders from those with the most need shortly thereafter.
According to DRAMeXchange, Korea-based SK Hynix makes 30 per cent of the world's DRAM chips, making it the second-largest player behind Samsung.
SK Hynix's Wuxi plant in China produces about half of its monthly wafers, although the company says it will move to open another plant shortly.