© costasz Analysis | August 09, 2013

Commodity DRAM price purges

As the DRAM industry has become an oligopoly and suppliers have reduced commodity DRAM production, average price for mainstream 4GB modules rose by 16% in the second quarter, from US$23.50 to US$27.25.
This marks a high for this year based on 4Gb price, and indicates a departure from the oversupply situation of previous quarters. As previously forecast by TrendForce, DRAM manufacturers’ second quarter revenue broke records, increasing by 24% QoQ to US$8.53 billion for the highest quarterly revenue growth in three years. With DRAM makers continuing to adjust supply, global DRAM revenue is expected to increase again in the third quarter.

Looking at the global DRAM brand manufacturer revenue ranking, Samsung and SK Hynix’s combined market share hit 62.7%, a slight decrease compared to the previous quarter. Samsung’s DRAM revenue rose by 7.7% QoQ, significantly less than SK Hynix’s 40.7% QoQ revenue growth.

In order to fulfill Samsung’s mobile DRAM needs, the manufacturer aggressively increased mobile memory production in the first half of the year, leaving less than 20% of total production for commodity DRAM in the second quarter. Thus, commodity memory price increases have had little impact on Samsung’s revenue. Currently, mobile DRAM accounts for more than 40% of Samsung’s production.

Although mobile memory is the supplier’s most profitable product, the 5-8% QoQ contract price decrease in the second quarter resulted in a drop in mobile memory revenue, bringing down Samsung’s overall DRAM revenue.

SK Hynix fared much better than Samsung in terms of revenue growth, taking the crown with a 40.7% QoQ increase. The commodity DRAM price surge benefitted the supplier significantly, as its commodity memory output accounted for 40% of total production in the second quarter.

According to TrendForce research, as the PC shipment outlook remains weak for the second half of the year and Samsung has begun purchasing mobile memory from SK Hynix, the supplier is aggressively adjusting its product ratios and is expected to lower commodity DRAM output to 30% of total production in the second half of the year.

Elpida and Micron took 15.2% and 12.9% of the DRAM market, respectively, putting the suppliers in third place with a combined market share of 28% after their merger on August 1. Elpida’s revenue increased by 37% QoQ due to commodity DRAM price recovery and as well as a slight increase in bit volume from subsidiary Rexchip. Looking at the new team’s revenue outlook, mobile DRAM will account for over 20% of total revenue, which will have a significant impact on the market.

As for Taiwanese suppliers, Nanya’s third quarter revenue increased by nearly 58.8% QoQ due to the rise in specialty and commodity DRAM prices. Currently, Nanya still has commodity DRAM in production although the supplier has made the transition to a foundry.

The manufacturer will continue to lower production and work on increasing the proportion of 30nm mobile DRAM to improve profitability. The bulk of Powerchip’s revenue comes from foundry business as well – after selling its P3 fab equipment to Kingston, the plant is dedicated entirely to the production of commodity DRAM.

However, unlike their previous business model, Kingston now supplies all production materials, resulting in a 43% QoQ decrease in revenue for Powerchip. Winbond’s revenue increased by 14.7% QoQ due to the increase in specialty memory prices.

As the peak sales season for consumer electronics arrives and Winbond begins production on low-density mobile DRAM, the supplier’s revenue will likely continue growing steadily. Looking at the market perspective, TrendForce believes that as the DRAM industry becomes an oligopoly, supply and demand will no longer be the only factor affecting price fluctuations.

As DRAM suppliers that have an oligopoly or monopoly on a specific memory product will be able to exert control over market prices, the major price fluctuations seen in recent years are unlikely to recur, resulting in a more promising future for the DRAM market.


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