Research shows that the DRAM supply bit growth rate in 2022 is about 18.6%. However, due to the high level of buyer inventory and the demand bit growth rate of only 17.1% in 2022, the DRAM industry will shift from short supply to oversupply next year.

Research shows that the DRAM supply bit growth rate in 2022 is about 18.6%. However, due to the high level of buyer inventory and the demand bit growth rate of only 17.1% in 2022, the DRAM industry will shift from short supply to oversupply next year. Although DRAM prices will decline due to oversupply, the overall output value will not fall sharply in an oligopolistic market. The total output value of DRAM is estimated to reach 91.54 billion U.S. dollars in 2022, a slight annual increase of 0.3%.

Using the oversupply ratio in each quarter of next year (hereinafter referred to as the sufficiency ratio) as the basis for forecasting, it is expected that the average unit price of DRAM will be reduced by 15% annually, and the price decline will be more pronounced in the first half of the year; it will benefit from the penetration rate of DDR5 from the second half of the year. Driven by the increase and the peak season demand effect, the average price decline will converge, and the possibility of flat or price increase cannot be ruled out.

There are many competitors in high-level digital products, and the output value of NAND Flash will increase by 7.4% next year

In terms of NAND Flash, the annual growth rate of supply bits in 2022 is about 31.8%; and the annual growth rate of demand bits is 30.8%. Therefore, the price of NAND Flash will also decline due to oversupply next year. In addition, since NAND Flash is a fully competitive market, the average price decline is more pronounced than that of DRAM. However, the stack of NAND Flash continues to advance in the layer structure. Therefore, it is estimated that the supply bit growth is still above 30%. In 2022, the total output value of NAND Flash still has room for growth, reaching 74.19 billion US dollars, an annual increase of 7.4%.

Similarly, using the sufficiency ratio of each quarter of next year as the basis for forecasting, it is estimated that the average sales unit price in 2022 will decrease by 18.0% annually. The price decline is also more pronounced in the first half of the year. The price decline is relatively convergent, or there is a possibility that the price will be flat in a single season.

On the whole, the total output value of DRAM and NAND Flash has changed over the years. Due to the different types of competition between the two, DRAM is basically more regular in capacity expansion, so the long-term average price has less volatility. At the same time, the scale of the process below 20nm has been reduced. Gradually reaching the physical limit, the annual bit growth rate is limited; while the NAND Flash production capacity expansion plan is relatively unstable, and the number of product layers can continue to increase, so the long-term average price fluctuates greatly, and then appears The growth rate of DRAM output value is not as good as that of NAND Flash, but the profit performance is the opposite.
Capital expenditures continue to rise, and if the output value fails to follow up growth, it may depress the profitability of manufacturers.

From the perspective of capital expenditures, in terms of DRAM, in recent years, its overall capital expenditure to revenue ratio (hereinafter referred to as: CAPEX to sales ratio) has gradually increased due to two main reasons. First, the shrinking of DRAM processes has gradually faced physical limits. After the 20nm process, with the exception of Micron 1α nm which still resulted in nearly 30% of the single-wafer bit growth, the other transitions from 1Xnm to 1Ynm, or 1Ynm to 1Znm process, the growth has converged to less than 15%. In 2022, Samsung and SK hynix’s state-of-the-art manufacturing process will be officially introduced into EUV, a key machine. The long lead time and high cost of production of this machine have caused the three major OEMs to allocate large capital expenditures in advance to cope with EUV. Place an order.

Secondly, because DRAM has formed an oligopolistic market, even if the average price falls occasionally, it is difficult for the average sales price to fall below the fully loaded cost due to the formation of the supplier’s production order, so the original DRAM manufacturers can gradually accumulate Profit from the production of this product. Due to the difficulty in transferring the manufacturing process, in addition to the three major OEMs, the smaller-market manufacturers such as Nanya Tech and Winbond all have actual expansion plans, which has become another major reason for the continued increase in the CAPEX to sales ratio in the DRAM market.

In terms of NAND Flash, its CAPEX to sales ratio has increased significantly since it switched to 3D NAND technology in 2017. It averaged 25-30% before that year, and has now increased to an average of nearly 40%. The main reason is that with the increase in the number of 3D stack layers, in addition to lengthening the time required for product production, the requirements for etching difficulty and accuracy have also increased. The mainstream layer number is moving towards the 1YY layer generation, and the supplier has also begun to develop the 2XX layer. Product technology, the requirements for the depth of a single etching are increasing, showing that the total capital expenditure required by the industry continues to grow as the number of layers increases and the output value increases.

According to the consultation, due to the technological advancement of NAND Flash stack layers, suppliers will continue to pursue higher layers in the future to reduce production costs per GB. Therefore, it is expected that there is still room for growth in capital expenditures in this industry, and the CAPEX to sales ratio will remain close to 40% or above. It is worth noting that if the output value cannot keep up with the growth rate of expenditure in the next few years, it may cause an excessive increase in the CAPEX to sales ratio, which will depress the supplier's profitability.

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