The recent earthquake and ensuing disaster in Japan will impact the DRAM market for months to come. Although the DRAM supply coming out of Japan appears secure (Elpida’s Hiroshima plant appears to be unharmed) there are significant potential demand-side impacts that must be considered. These break down into near-term and long-term impacts.
Japan consumes approximately 5% of the world’s mobile phones and computers. In the near-term Japan will likely focus its resources on rescue and recovery. These triage efforts will increase demand for the necessities such as food, shelter, and transportation, but they will draw down demand for many of the devices that consume DRAM. Additionally, the effect on the global psyche has to be considered. Global stock markets have not fared well over the past several days – clearly worldwide confidence, which was already shaky, has not been buoyed by the disaster. Any near-term falloff in demand will have to be combined with the potential supply challenges that could arise due to the integrality of the Japanese electronics ecosystem. When all effects are taken into consideration we believe that the near-term supply/demand balance could shift more towards oversupply as Japanese consumers postpone technology purchases.
In the longer-term, however, there will likely be a surge in demand as the Japanese economy looks to replace those devices that have been lost or destroyed in the catastrophe. This is an effect we anticipate seeing six months from now and should persist well into 2012. The long-term prospects for the DRAM industry are better.
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