TAIPEI, Taiwan PC memory makers are taking note of a few cautionary trends that could twist kinks into their plans for a rapid transition to second-generation DDR DRAM.
Topping the list of threats is the relatively high pricing for first-generation double-data-rate DRAM, DDR1. Good times have returned to the DRAM industry, and battle-scarred memory vendors fear that a headlong rush to DDR2 might ruin a good thing especially since DDR2's benefits, while quantifiable, come at a cost and don't necessarily stand out among the crowd of recent PC platform changes.
In leaner times, a plausible case could be made for a quick bump to the second generation. DDR2 consumes less power than its predecessor, is faster and comes in higher densities up to 2 Gbits. An eight-bank architecture improves performance, and the ball-grid-array packaging makes for better electrical characteristics.
But the improvements may not be noticed much amid all the higher-profile changes to the PC, such as PCI Express, Gigabit Ethernet, high-fidelity audio and serial ATA. Even in notebooks, the power savings credited to DDR2 constitute only a tiny part of the budget about 3 percent, according to specs from Taiwan-based DramExchange.com and are not nearly as important as the savings generated, for example, by Intel Corp.'s Centrino platform.
Other issues are test and packaging. "Generally the testing time for DDR2 synchronous DRAM (400 to 450 seconds) is 30 percent longer than for DDR SDRAM (300 to 350 seconds), due to its complexity," DramExchange.com observes in a research note to clients. And DDR2's use of a fine-pitch BGA in place of the thin small-outline package used for DDR1 increases the second-generation's "back-end cost 20 percent" over the first, DramExchange analysts wrote.
DramExchange predicts that if DDR takes "more than a 20 percent market share of total DDR SDRAM, a testing capacity shortage is expected in the second half" of this year.
The consensus among suppliers seems to be that DDR2 will claim about 25 percent of the market by year's end. Some suppliers may allocate a little more than that. Ultimately, it is going to boil down to revenue per wafer, and a key component of that is yield.
"You'll see that manufacturers that have a strong yield on DDR2 will be much more aggressive, and those that don't will back off somewhat because they are able to achieve higher revenue per wafer, and therefore ROI, on a DDR1 technology platform," said Jim Elliott, associate director of DRAM marketing at Samsung Semiconductor Inc.
Careful what you wish for
The U.S. spot market price for the mainstream 256-Mbit DDR1 memory, at 266 MHz, hit $6.49 in April, up 50 percent from the beginning of the year. Though prices have since slipped back a bit, DRAM makers don't have much to complain about, considering how tough the past few years have been for them. Production yields on DDR1 are good, and their cost per chip is dropping as 300-mm wafer plants improve efficiency.
Such an alignment of good fortune may limit the motivation of DRAM makers to push a fast transition to DDR2, especially if OEMs are hypersensitive to any increases, which they usually are. Earlier this month, Dell Inc. cited the steep rise in memory as a factor eating into profit growth, even though its net still rose a healthy 22 percent compared with last year.
For their part, memory makers are happy to have any profit at all, given the tribulations of the past few years. "People can make a lot of money on the existing products," said Pai Pei-lin, assistant vice president at Nanya Technology Corp., which holds about a 4.5 percent share of the global DRAM market. "In the second half DRAM supply will still be tight, so people will be less motivated to do anything that might threaten the amount of money they are making."
How quickly things have changed. Two to three years ago, DRAM makers were downtrodden, desperate and still suffering flashbacks to the ultimately unsuccessful transition to Rambus DRAM. They tried any marketing gimmick to persuade systems makers and consumers that even a jump from 266-MHz to 333-MHz DDR would result in awe-inspiring performance increases on the desktop.
Rambus lingered so long partly because Intel had thrown its considerable market weight behind it, stubbornly sticking with the Pentium 4 and introducing its i845 chip set for DDR late in the transition cycle to that technology.
Now Intel is aggressively backing DDR2: Over the next two quarters, the company is expected to ship five chip sets that support it: the previously announced Grantsdale, Alderwood, Lindenhurst, Tumwater and Alviso products. Initial chip sets will support the 400- and 533-MHz versions of DDR2. DRAM vendors have 667-MHz versions in the works as a prelude to the eventual transition to DDR3.
The jury's out on how much Intel's support will influence the course and timing of the DDR2 shift. Market watcher iSuppli Corp. believes DDR2 is unlikely to establish a mainstream presence in the market this year. It further suspects the transition will be much more difficult than the previous migrations from extended-data-out to synchronous DRAM and then from SDRAM to DDR.
But Samsung thinks the coming transition will be the fastest one ever, Elliott said, because "this time everybody is moving in the same direction."
Elliott also cited a short ramp to price parity between DDR1 and DDR2 technologies. Parity will occur in 2005, roughly 12 to 18 months after the launch of the technology, he said.
Samsung is shipping 512-Mbit DDR2 SDRAMs based on its new 100-nm process and is sampling a 1-Gbit version. The chips are fabricated at Samsung's 300-mm fab in Hwaseong, South Korea.
Intel has validated that products from Samsung, Micron, Infineon, Hynix and Elpida support its DDR2 chip sets, according to Geof Findley, business development manager of platform memory operations at Intel. "We are in the ramping stage for DDR2 400/533," Findley said. "The ecosystem is healthy and ready."
Intel plans to ship the Grantsdale, Alderwood and Tumwater chip sets this quarter. Grantsdale is geared for desktops and Alderwood targets workstations. Tumwater is intended for servers, where DDR2 is expected to find its earliest adopters among those seeking to improve bus command efficiency.
In the third quarter, Intel intends to ship Lindenhurst, also geared for servers, and Alviso, a DDR2-enabled product for mobile systems.
Leading memory module manufacturer Kingston Technology Co. already has DDR2 products on the spot market, but they carry a high premium, said Sherry Garber, DRAM analyst for Semico Research Corp.
"I think some of the issues [with DDR2] are test capability, packaging changes and capacity," Garber said.
In Taiwan, contract PC makers Quanta Computer Inc. and Compal Electronic Inc. have reportedly designed DDR2-based products for Hewlett-Packard and Dell that will ramp into mass production in the next few months.
Meanwhile, DDR1 spot market prices have dropped 30 percent since April, and iSuppli thinks that 256-Mbit spot prices will decrease to $4.50 soon, which will then pull down contract prices. The lower, the better, says iSuppli, because prices are still too high to ensure steady demand and a quick transition.
But Nanya Technology's Pai is hoping for a longer ride on the upside. "It's about time we get a break," he said.
Mark LaPedus contributed to this story.