Japan disaster spurs increase in chip revenue

IHS says the biggest factor contributing to the increased semiconductor forecast is a boost in the revenue outlook for dynamic random access memory (DRAM) devices. The new forecast increases the 2011 DRAM revenue forecast by 6.6 percentage points, and now anticipates this area will experience only a 4% decline for the year, compared to an expected decrease of 10.6% growth previously. Dale Ford, analyst at IHS says the increase is entirely driven by an increase in average selling prices during the first quarter, partly because of supply disruptions caused by the earthquake. "The earthquake will result in a 1.1% reduction in global DRAM shipments in March and April," Ford stated. "This reduction, along with other factors, contributed to a steadying effect in contract prices for DRAM in March, which typically is a weak month for sales in which prices had been expected to decline by as much as 3%. The impact of the prices holding their ground during this period is dramatic - and will represent a major boost for DRAM revenue for the entire year." Average contract DRAM prices in April are forecast to range from being unchanged to a 2% increase, compared to a previously expected 3 to 4% decline. Neither of Japan's DRAM fabs was damaged in the quake. However, a chip assembly plant in the Akita area owned by Elpida Memory suffered a disruption in production, causing the reduction in shipments. IHS forecasts that upward price pressure is expected to ease for DRAM in the second half of the year. Ford observes that DRAM pricing could face further increases later this year if wafer shortage issues worsen. "Japan is the world's leading producer of silicon wafers, the key raw material used to make semiconductors, accounting for 60% of global supply," he said. "Top wafer supplier Shin-Etsu continues to suffer production outages for its 300mm wafer manufacturing. The company's Kamisu and Nishigo plants are down, which together make up about 20% of global wafer production. As such, the supply of 300mm raw wafers could be a problem for memory makers. And if supply problems persist, manufacturing efficiency will be impacted after raw wafer inventory is depleted. In particular, DRAM output will be affected when the number of wafers in the manufacturing supply chain declines to less than 50% of typical levels." According to IHS, such a possibility could happen starting in October, resulting in further price increases for DRAM.