Elpida Memory's move to file bankruptcy protection this week will benefit the remaining players in the DRAM market, reducing supply and boosting pricing and revenues in the second half of the .
If more than 25% of Elpida's manufacturing capacity is taken offline, the global ASP for all DRAM shipments is projected to rise to US$1.21 by the end of 2012, up 15.5% from US$1.05 at the end of the first half of the year. Without such a reduction in capacity, pricing would rise to US$1.13 at the end of the year, up just 8.5% from the price at the end of the first half.
"A meaningful reduction in Elpida's manufacturing will cause the DRAM market to go into a state of undersupply, causing prices to increase," said Mike Howard, senior principal analyst for DRAM & memory at IHS. "Shipments likely will decrease because of the Elpida bankruptcy, even though the resulting increase in revenue, driven by higher prices, will cause the market to perform better than expected in 2012. The ultimate fate of Elpida's manufacturing assets, which remains to be decided, will be the major factor impacting pricing and revenue growth in 2012. But one thing is certain: Elpida's bankruptcy means the remaining DRAM players can look forward to a much rosier 2012 than they did just one week ago."
IHS conservatively estimates that 2012 DRAM revenues will exceed US$30 billion, compared to the previous forecast of US$24 billion.
Elpida's filing for bankruptcy does not necessarily mean the end of manufacturing for the company. Production has not ceased at its manufacturing facilities, and its engineers, salespeople, marketers and corporate strategists are hard at work on finding a path forward.
Nevertheless, the company likely will look very different on the other side of bankruptcy. Not only will the company have to deal with its massive debt load or more than US$5 billion, it also must deal with the challenges of manufacturing in the high-cost regions of Japan.
"If all of Elpida's fabs, such as its Hiroshima facility, cease making memory permanently, then the chronically oversaturated DRAM industry may finally reach a state of supply/demand equilibrium," Howard noted. "While it's unlikely that all of Elpida's production will disappear, this development could mark a new era for the DRAM market, one marked by stronger pricing power for suppliers."
Many existing Elpida customers during the coming months will seek alternative suppliers to secure DRAM products. While every DRAM company likely will gain market share as customers seek reliable alternative suppliers, Micron Technology and Nanya Technology are expected to realize the greatest gains.
Hynix Semiconductor and Samsung Electronics are currently the two largest DRAM suppliers. Because of this, customers likely already use them as sources. And as customers seek additional suppliers, they will be more apt to look to Micron and Nanya.
Inotera Memories, which supplies both Micron and Nanya, and is currently operating at less than full capacity, will see its production return to full capacity as it serves Micron and Nanya's incremental increase in demand.