SAN FRANCISCO -- Micron Technology Inc. this week raised OEM contract pricing on 64-megabit DRAMs from $7.50 to over $9, effective immediately, and another hike may be right around the corner as the full impact of the Taiwan earthquake is felt, a company official said here.
The increase is a result of several factors, including "just incredible demand from PC OEMs," according to Kipp Bedard, vice president of investor relations at the Boise, Idaho firm. "It looks like there's probably another move up coming fairly shortly," he added during a presentation at the Banc of America Securities Investment Conference.
Spot market pricing is also showing no signs of slackening, with the latest reports indicating $19 to $20.50 as the range for 64M parts, Bedard said. "There's not a lot of volume going on there because the suppliers were woefully short, even prior to the earthquake in Taiwan, just meeting the OEM requirements for Q4."
Micron was able to put just 13% of its DRAM supply into the spot market in the fiscal quarter that recently ended, compared to a historic range of 20-30%. The company was hoping to bring that figure up to 15-20% in the current quarter, but "I don't think we're going to get that high based on the demand we're seeing from the OEMs," he said.
Micron's top OEMs were recently asking for 4.5 million to 5 million units per week to meet the Christmas season demand, but the company told them it could only supply about 2 million units per week, Bedard said. Demand has been shifting from white box makers to name brand suppliers, he added.
"This has been one of the first times at least in the past three years that's we've had an overall strength and shortage in semiconductors across the spectrum," Bedard said. "You've got some flash products ranging from 26 to 42 week lead times. You've got SRAM extremely tight as well, ASICs, logic, pretty much everything across the board."
There isn't enough increase expected in wafer outputs to take the pressure off DRAM pricing, he said. Samsung is planning to open a new fab next spring, and Micron expects to add another 5,000 wafers per week at its overseas fabs by spring, bringing that total to about 17,000, which would match its weekly output in Boise. But other than a joint venture fab NEC is opening in China, Bedard said he didn't know of any other capacity increases in the pipeline.
Micron expects that all of its Boise capacity will be shifted to 0.18-micron in about 4 months, and a small part of the Boise fabs are already being moved to 0.15-micron. Its overseas fabs are about a month away from being completely converted to 0.21-micron, with around 15% of those lines already at 0.18-micron.
Between the new wafer starts and the die shrinks, Bedard calculated that industry bit growth will be around 70% over the next 12 months, while demand will be 75-80%. Demand could grow even faster, depending on when Windows 2000 is introduced, which could drive DRAM demand to 128M-bytes per box, he added.
There are several reasons for the recent DRAM price increases, he said. "As of last spring, Taiwanese incremental wafer capacity was moving back to other products that gave them substantially better gross margins," Bedard said. Low-end PCs in July began offering 64Mbytes of DRAM, up from 32Mbytes, and PC companies began introducing new models for the back-to-school season a month earlier than usual. The power outage that affected Taiwan this summer also had an impact, and "this earthquake stirs up another set of questions about how much supply is impacted," according to Bedard.