The following column was provided by Nam Hyung Kim, a senior analyst with iSuppli Corp., an El Segundo, California-based market research firm.
A visit to five DRAM suppliers on two continents this month by iSuppli revealed growing optimism among memory makers about market prospects in 2004, although that positive sentiment was tempered by concerns about a lack of a technology or density transition next year.
In October, iSuppli met with Samsung, Infineon, Hynix, ProMOS and Powerchip, and anticipating continued market growth in 2004, many of these suppliers revealed plans to increase production, to boost sales and to reorganize operations to capitalize on market growth.
Significant developments at the suppliers included:
Samsung Electronics of South Korea plans to ramp up DRAM production on 300-mm wafers at an accelerated rate in 2004.
Infineon Technologies AG plans to increase its DRAM production on 300-mm wafers in 2004 at its Inotera Memory Inc. joint venture with Nanya Technology Corp. The German chipmaker recently transferred its Asian headquarters from Singapore to China to try and help it gain more market share from Hynix Semiconductor Inc. in the region. Hynix is presently is the number-one DRAM supplier in China, which is the world's fastest-growing region for DRAM sales.
ProMOS Technologies Inc. of Taiwan is in the process of re-organizing its DRAM sales operations with its parent Mosel Vitelic Inc., which established ProMOS as a joint venture with Infineon. Sales responsibility will move from Mosel to ProMOS. ProMOS is making DRAMs at a rate of 20 million 256-Mbit equivalent units every month. The company said it would be promoting DRAM sold under its own brand name aggressively in 2004 and now is getting these products qualified at PC market leader Dell Inc.
Powerchip Semiconductor Corp. of Taiwan said it now is supplying 20 to 30 percent of its DRAM to its technology partner, Elpida Memory Inc. of Japan, and its branded products are gaining market share.
Sentiment among the DRAM makers was uniformly optimistic, with all agreeing that demand will generate strong bit growth in 2004. However, the suppliers expressed concern regarding whether the type of DRAM being sold in 2004 can continue to deliver the kind of revenue growth they've seen in 2002 and 2003.
iSuppli does not expect any kind of crossover in DRAM demand in 2004, either for part types or for densities. The present mainstream part, the 256-Mbit Double Data Rate (DDR) synchronous DRAM will remain the predominant DRAM throughout 2004, iSuppli predicts.
Historically, DRAM pricing on a per bit basis declines at an average annual rate of 35 percent. In order to achieve higher average selling prices (ASPs) for components, or even to slow the rate of price erosion, the DRAM industry needs new technologies and chip capacities, for which buyers are willing to pay a premium.
Despite the absence of such developments in 2004 iSuppli predicts an overall DRAM price decline of about 15 to 20 percent in 2004, compared to 26 percent in 2003. DRAM revenue will amount to $21.2 billion in 2004, up 26.9 percent from $16.7 billion in 2003.
Despite the expected growth, conditions could be challenging for DRAM suppliers in 2004 due to the price erosion and lack of a technology or capacity transition. To achieve such growth in 2004, bit supply will have to rise by 50 percent. Although increasing demand will offset potential supply issues, DRAM makers should be aware of potential challenges in the market.
In other DRAM news, spot market prices this week rose for the second week in a row. Prices for 256-Mbit SDRAM increased due to limited supplies. Furthermore, Hynix recently announced it would stop selling parts on the spot market in order to stimulate prices increases. This helped send prices up across the board.
Despite the rebound in spot market pricing and the continued efforts of Hynix and other suppliers to boost DRAM tags, market conditions do not appear to be improving much in the fourth quarter. iSuppli's forecast of weak 8.3 percent revenue growth in the DRAM market in 2003 appears to be valid.
The price premium for DDR400 Dual Inline Memory Modules (DIMMs) compared to DDR266 DIMMs is widening as short-term supply issues have arisen. The 256-Mbyte DDR400 DIMM now carries about a 20 percent price premium compared to 256-Mbyte DDR266 DIMMs. Some DIMM makers are experiencing quality issues with new die design rules, thus reducing production and constraining supplies.
Nam Hyung Kim can be contacted at the following email address: firstname.lastname@example.org