SAN JOSE -- DRAM makers are readying production capacity and Intel Corp. is lining up chipset support, but questions surrounding the initial price premium of DDR2 memory chips are complicating industry efforts to predict how quickly PC OEMs will adopt the next-generation technology.
For their part, DRAM suppliers said they will have ample quantities of the devices when demand begins to ramp up in the first half of next year. A consensus of vendors agreed that DDR2 memory will be adopted first by server manufacturers, which are seen as more inclined to pay higher prices to gain access to the architecture's higher speed, lower power, improved heat dissipation, and smaller form factor.
How fast DDR2 ramps into the mainstream PC market is another question, one that panelists at last week's Intel Developer Forum had difficulty answering. "If the DDR2 price premium is small and goes away quickly, we could see a fairly aggressive ramp," said Pete MacWilliams, Intel senior fellow and director of platform architecture. "If the premium is too high, it will take longer to bring DDR2 into the mainstream."
With most DRAM suppliers eager to resurrect profits, the competitive pressure to ramp up production quickly "could have everyone fighting for orders, and that will drive down the DDR2 price," said Tom Quinn, vice president of sales and marketing for Samsung Semiconductor Inc., San Jose.
If the initial price premium is too high, however, suppliers could be in a bind. Matthew Godfrey, an analyst with Semico Research Corp., Phoenix, said OEMs typically set aside 10% of their total system costs for mainstream memory, a threshold that could affect how fast they embrace DDR2. And since upcoming Intel DDR2-enabled chipsets will also support DDR1 memory, PC OEMs have the option of using either. That gives them a hedge if initial DDR2 price premiums turn out to be unacceptable, MacWilliams said.
The difficulty forecasting DDR2 PC adoption rates is leaving DRAM vendors in a quandary. Because the chips have a three- to four-month production cycle, suppliers must gear up well in advance to ensure they have enough of the devices to meet potential demand. Chee Ho, DRAM product marketing director for Infineon Technologies North America, San Jose, warned at an IDF panel that "if customers are not willing to pay the premium, we could get an oversupply of DDR2, because I don't expect any suppliers to pull back from their initial production ramp."
Major memory vendors all said they will have no problem next year shifting to the next-generation chip, and each claimed to have DDR2 devices in validation by Intel.
MacWilliams said that the first round of tests will be completed in another month or so. "In testing so far, we have only seen a few small issues that needed to be fixed, which is normal. We've seen no show-stoppers, and no problems with the DDR2 specification or technology."
Intel has also started validation testing of DDR2 modules, which is expected to run through the end of the year. The company's own DDR-enabled chipset for servers, code-named Lindenhurst, and a reference motherboard also are expected to be validated by year's end. Lindenhurst is slated to be available the first half of 2004.
An unconfirmed DDR2-enabled chipset for desktop PCs, which industry sources said is the Grantsdale, is also scheduled to be introduced the first half of next year.
"We can ramp chipset production faster than DRAM vendors can ramp memory chips," MacWilliams said. Once uncertainties regarding desktop PC adoption rates have been addressed, market forecasters expect DDR2 sales to take off quickly.
Farhad Tabrizi, vice president of worldwide marketing for Hynix Semiconductor Inc., San Jose, estimated DDR2 will garner about 10% of total DRAM market revenue next year, jumping to 45% in 2005 and 75% in 2006. Tabrizi said that PC manufacturers would initially adopt DDR2/400 and DDR2/533 chips, moving to DDR2/667 in the second half of 2004 and DDR2/800 in the first half of 2005.