© pichetw Analysis | May 22, 2017

1Q/17 Global DRAM revenue rose by 13.4% QoQ

The global DRAM revenue reached a new record high in the first quarter of 2017, reports DRAMeXchange, a division of TrendForce.
Taking account of the severe supply shortage towards then end of 2016, most PC-OEMs started to negotiate first-quarter contracts in advance during last December. Their demand for sustained DRAM supply had resulted in an at least 30 percent increase in the average contract price of PC DRAM modules between the fourth quarter of 2016 and the first quarter of 2017. The effect of the price surge in the PC DRAM market spilled over onto the server and mobile DRAM markets. The prices of mobile DRAM products also grew by nearly 10 percent on average this first quarter compared with the preceding quarter.

“The consolidated DRAM revenue for the first quarter of 2017 rose by 13.4 percent versus the prior quarter,” said Avril Wu, research director of DRAMeXchange. “From the supply side, additional DRAM manufacturing capacity will become available in this year’s second half at the earliest mainly to meet the demand related to shipments of new smartphones and PCs during that period. As for this second quarter, the mobile DRAM market has cooled down temporarily, but the server DRAM market is still quite hot. DRAMeXchange anticipates product prices will again go up significantly in both PC and server DRAM markets, with their respective average increases exceeding 10 percent from the first quarter.”

Samsung was still the revenue leader in the DRAM industry in the first quarter, posting a 6.8 percent increase compared with the prior three-month period. Samsung saw just a marginal rise in its revenue because of the already exceptional result from the base period (the fourth quarter of 2016). The supplier’s bit shipment growth was also relatively limited. Nonetheless, Samsung has captured 44.8 percent of the global market in the first quarter with revenue reaching USD 6.3 billion, which far surpassed second-place SK Hynix’s revenue of USD 4 billion for the same period. SK Hynix also recorded an impressive growth of 21.5 percent compared with the prior quarter and took 28.7 percent of the global market. Together, the global market share of the two South Korean suppliers reached 73.5 percent. U.S.-based Micron was still ranked third in the first quarter, but the supplier grew its revenue by 22.3 percent versus the previous quarter and controlled 21 percent of the global market.

All three major suppliers enjoyed huge increases in their operating margins in the first quarter and will continue to do so in this second quarter

In light of the massive price upsurge, Samsung’s operating margin in the first quarter of 2016 rose to 54 percent, the highest among the top three suppliers. SK Hynix’s operating margin came to 47 percent, up from 36 percent of the prior quarter. Micron’s operating margin reached 32.5 percent, more than doubling from 14.9 percent in last year’s fourth quarter. As prices of DRAM products maintain their upward trajectory, all three suppliers are expected to see increases in their profits for this second quarter.

In the aspect of technology migration, Samsung’s goal for this year is to make a smooth transition to the 18nm process. This will allow Samsung to keep a comfortable lead over its competitors while having a level of production that satisfy the demand of its clients. Samsung has already deployed the 18nm process at its Line 17 fab and plans to have its Line 15 fab using the technology as well. By the end of this year, Samsung hopes to have its 18nm process responsible for more than 40 percent of its total DRAM bit output.

SK Hynix’s technology target for 2017 is to continue raising the yield rate and output of its 21nm technology. The supplier has scheduled to begin pilot production on the 18nm process during this year’s second half and wants to have the technology ready for mass production in the first half of 2018.

As for Micron, its subsidiary Micron Memory Taiwan reached the mass production stage for its 17nm process at the start of 2017 and is expected to load most its DRAM production onto this technology by the end of the year. Inotera, which is also wholly owned by Micron, currently has no technology migration plan and will instead focus on raising the yield rate of its 20nm process.

Looking at performances of Taiwanese suppliers for this first quarter, Nanya’s revenue rose by 3.6 percent compared with the prior quarter due to price increases for its specialty DRAM products. Nanya also accelerated the production timetable for its 20nm process after seeing that the first-batch yield was higher than expected. The supplier plans to expand its 20nm capacity to 30'000 wafers per month towards the end of this year.

Winbond by contrast posted a decline of 5.5 percent from the prior quarter’s result mainly because of changes its product mix. A part of supplier’s wafer capacity was shifted from DRAM to NOR Flash production in the first quarter as the NOR Flash demand showed a sharp upswing. In addition to expanding the share of the 46nm process in the total DRAM output, Winbond is expected to formally begin mass production on its 38nm this third quarter. The supplier’s future revenue result will likely be affected by the ramp-up of its 38nm production.

Powerchip’s first-quarter DRAM revenue grew by 7.6 percent compared with the prior quarter due to the booming market and returning orders from clients. The rising DRAM prices furthermore boosted Powerchip’s foundry business, which in turn contributed to the supplier’s revenue.

Read more at Trendforce.
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December 05 2018 3:01 pm V11.10.4-2