A tectonic shift from PCs to mobile devices is remaking the DRAM market, moving a historically volatile business onto firmer, safer ground.
Since the 1980s, the DRAM business has been a high-volume, commodity business, with the lion's share of production going to PCs. Supply and demand were often wildly out of balance. When the PC market boomed, it could cause DRAM shortages, which led to high DRAM prices and led memory makers to increase production. Then the industry would crash as supply caught up with, and then overshot, demand. DRAM makers were living in clover in the good times, and scratching the barrel in others. It was a tough business.
But the rise of mobile devices is changing that cycle. Today's DRAMs fall into one of three major categories: traditional DRAM for PCs (DDR3), DRAM for mobile (low-power DDR2), and specialty DRAM, manufactured for higher performance in particular niches, according to Michael Howard, senior principal analyst, DRAM and compute platforms, at IHS Corp. These three are generally not interchangeable; you can't use PC DRAMs in smartphones and tablets.
And demand for mobile DRAM is rising fast. Smartphones sales surpassed PC demand in the fourth quarter of 2011,
according to market research firm Canalys. IDC has predicted that mobile devices as a whole will outsell PCs by more than two-to-one this year. As of the second quarter of 2012, PCs accounted for less than half of the market for DRAM, the first time its share has ever fallen below 50 percent, according to IHS. "The decline in DRAM share for PCs appears irreversible," said the company in a report, predicting that it will fall from 49 percent in second quarter of 2012 to 43 percent by the end of 2013.
It's already making a difference in who has survived the brutal DRAM market of the last few years. Mobile DRAM and specialty DRAM are not commodity products, so companies that make them, in addition to traditional DRAM, have had more stable pricing. "Mobil DRAM is built to order," said IHS's Howard during an interview with me. "Prices are negotiated on a quarterly basis." That means production is more likely to meet demand, and to generate higher margins for memory vendors.