IHS's weeks of inventory DRAM index, which provides a snapshot of DRAM inventory levels, dropped to 11.6 weeks in the first quarter of 2012, down from 12.1 weeks in the fourth quarter of 2011, according to IHS. It marked the second consecutive quarter of improvement since the index peaked at 12.9 percent in the third quarter of 2011, IHS said.
Despite the improvement, the first quarter DRAM inventory index remained higher than it did in the first quarter of 2011, when it stood at 9 weeks, and remains above the long-term average of 9.5 weeks IHS said.
Clifford Leimbach, analyst for memory demand forecasting at IHS, said through a statement that the latest drop in the inventory index was due primarily to an aggressive stockpile burn-off from Japanese supplier Elpida Memory Inc., which declared bankruptcy in February. Elpida is set to be acquired by Micron Technology Inc.
"The action taken by Elpida—and the resulting drop in overall inventory levels for the industry in the first quarter—is a one-time event unlikely to be repeated," Leimbach said. "Even so, the reduction in stockpiles in early 2012 means that pricing should continue to strengthen in the second half of the year."
Average pricing for DRAM in the 1 gigabit-equivalent density is estimated to have risen by 1.5 percent in the second quarter, according to a preliminary estimate by IHS. The firm projects it will further climb by 7.7 percent and 3.5 percent, respectively, in the third and fourth quarters of the year.
By contrast, pricing for DRAM in the 1 gigabit-equivalent density declined by 24 percent and 12.4 percent, respectively, in the third and fourth quarters of 2011, according to IHS. Pricing also declined by a further 5.9 percent in the first quarter of 2012, according to the firm.
Inventory in the first quarter could have declined to even lower levels were it not for the elevated DRAM stockpiles of two of the largest DRAM players, according to IHS. SK Hynix Semiconductor Inc. of South Korea and U.S.-based Micron saw a modest 15 percent and 8 percent increases, respectively, in their inventories during the period, putting upward pressure on the index value that also prevented the drop from being larger in the first quarter, IHS said.
Still, the inhibiting effect of SK Hynix and Micron should not be construed as a negative, IHS said, because there is strong feeling throughout the industry that the DRAM average selling price will strengthen in the second half of this year. Renewed optimism for PCs spurred by Ultrabooks, and the impending release of Windows 8, are likely to translate into strengthened DRAM demand, bringing supply and demand into closer balance, according to IHS. As DRAM prices rise because of these market forces, SK Hynix and Micron could be well-positioned to take advantage and sell the inventory that they have built up, IHS said.
IHS projects that its DRAM inventory index will continue decline over the next few quarters. DRAM firms appear to be comfortable with their inventory levels overall, positioning themselves to reap the rewards of an expected increase in demand during the succeeding quarters, according to the firm.
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