New Micron Group catching up to Samsung

According to DRAMeXchange, benefitting from the stabilization and recovery of commodity DRAM price in the second quarter, DRAM manufacturers’ average selling price (ASP) decline has shrunk significantly; makers with a larger portion of commodity DRAM production even saw a slight ASP increase. Additionally, as manufacturers are nearing fully loaded capacity and technology migration is contributing to bit growth, global DRAM industry revenue increased by 12% QoQ in the second quarter. However, overall DRAM revenue is still shrinking this year, evident in the fact that second quarter revenue figures decreased by 13.8% compared to the second quarter of 2011. Looking at the global DRAM brand manufacturer revenue ranking, Korean suppliers Samsung and SK Hynix remain in the lead, taking nearly 70% of the market between them; Elpida and Micron came in third and fourth, respectively, and the gap between the two continues to narrow. Although the makers are currently in the process of merging, as the acquisition has not been completely finalized, TrendForce continues to rank the suppliers separately. However, their combined market share is currently 25.4%, exceeding second-place SK Hynix’s market share. As for the Taiwanese vendors, while benefitting from the commodity DRAM price rebound, their total combined revenue only accounts for 8.6% of the market, a 0.2% QoQ increase. As the Taiwanese makers gradually transition to foundry business and non-DRAM production, the industry’s commodity DRAM production ratio is expected to continue decreasing. Samsung Semiconductors Takes the Lead, SK Hynix Shows Stable Performance Samsung Semicondutors’ second quarter market share reached 39.5%; a slight decrease compared to the first quarter, but the maker remains in the lead with revenue climbing by nearly 7% QoQ. TrendForce analysis indicates, although commodity DRAM ASP rose by nearly 20% in the second quarter, mobile DRAM fell by 15% QoQ. Since Samsung has a larger portion of mobile DRAM production than other makers, the price decrease and revenue increase canceled each other out, resulting in a market share decrease. Nevertheless, the Korean maker continues to see increasing profits, with a DRAM operating margin of 18% for the second quarter, far higher than its competitors’ figures. Samsung’s profits can be attributed to its continually improving product mix, and the popularity of its Galaxy smartphone series in particular. Furthermore, with the continual advancement of process technology, Samsung’s mobile DRAM output ratio will continue to rise, which will benefit the maker’s profitability. Second-place market share holder SK Hynix’s performance was relatively stable as well, with second-quarter DRAM revenue at US$1.713 billion, a 14.2% QoQ increase, and market share increasing slightly. Benefitting from commodity DRAM ASP recovery, SK Hynix’s operating margin was 4%, the first time in several quarters the maker has seen a positive operating margin figure. The turnaround can be attributed to cost reduction and lowered depreciation and amortization expense at the maker’s Wuxi fab. SK Hynix, like Samsung, holds a conservative demand outlook for the second half of the year and has adjusted its PC shipment forecast downwards. As ASP for various product lines may decrease, the maker’s profits may shrink in the future.   Elpida and Micron to Take Second Place Together Japanese manufacturer Elpida came in third in the 2Q12 revenue ranking, with a 17% QoQ increase in sales and 0.5% market share growth. Although the maker has filed for bankruptcy protection and is not releasing operating margin figures, benefitting from the commodity DRAM increase as well as a continually rising mobile DRAM production ratio at its Hiroshima fab, TrendForce expects Elpida’s operating margin will see a large improvement over the previous quarter’s -68% figure. The gap between Elpida and Micron’s market share continues to shrink; benefitting from ASP recovery, bit growth, and cost reduction, U.S. supplier Micron’s revenue increased by 20% QoQ in the second quarter, pushing its market share to 12.5% and operating margin to -10%. In the future, Micron will continue to focus on server and networking products, while also increasing the proportion of mobile DRAM shipments to maintain ASP and prevent further losses. Micron and Elpida’s merger is already underway; although details regarding process technology and production capacity have yet to be finalized, the makers’ combined capacity exceeds second-place SK Hynix’s. The new team plans to improve their operating margin by focusing on migrating to 2xnm process technology and adjusting product mix. With Elpida’s strengths in mobile DRAM development and Micron’s grip on the server DRAM market, if the makers manage to properly adjust their product plans, both will benefit. The Micron-Elpida merger will help improve the DRAM ecosystem, as fewer manufacturers will result in less price competition. Taiwanese Makers Must Evolve to Survive Taiwanese makers’ combined market share increased by a mere 0.2% QoQ. Powerchip’s revenue grew by 38% due to the commodity DRAM price increase, a steady increase in its foundry business, and the sale of its Rexchip shares. Rexchip’s revenue also increased, by 12% QoQ. The maker is maintaining fully loaded capacity, and officially joined the Micron group in the second quarter; future product mix adjustments will be the key to Rexchip’s profitability.   Nanya’s revenue increased by 15% QoQ, and the maker is currently migrating to the 30nm process. Although commodity DRAM price is currently declining, there has been no news of capacity cut plans. TrendForce indicates, despite the fact that Nanya’s mobile DRAM sales contributed 2% to total revenue, there is still room for cost structure improvement. As the maker is expected to experience losses again in the second half of the year, they will continue to sell shares through a private placement. Additionally, they will discuss plans to transition to the foundry business sector in hopes of preventing cash outflow due to excessive DRAM capacity. Inotera’s status is similar to Nanya’s, with a quarterly revenue increase of 20%. Currently Inotera’s capex is mostly dedicated to migration to the 30nm process, which will provide a significant contribution to Micron’s bit growth. Additionally, the Taiwanese maker is increasing non-commodity DRAM output, aiming to reach 15-20K wafers per month by the end of this year. As for ProMOS, the maker ceased wafer starts in the beginning of July, and shipments will stop around mid-August; the company is currently in the process of tying up loose ends. The Taiwanese government has intervened, and ProMOS’ lenders have agreed to initial restructuring plans, hoping to accelerate the sale of ProMOS’ production plants. Winbond’s losses have improved compared to the previous quarter, and it is evident the maker is making a gradual transition to NOR flash production, decreasing DRAM capacity along with the rest of the Taiwanese memory makers.