Global 2013 PC DRAM market a three-horse race

Josephine Lien, Taipei; Jessie Shen, DIGITIMES [Thursday 27 December 2012]

With Micron Technology's merger with Elpida Memory set to complete, and second-tier players looking to turn their focus away from the PC memory market, the number of commodity DRAM makers will reduce significantly in 2013 with only big players dominating the sector.

A three-horse race

Samsung Electronics, SK Hynix and Micron will dominate the PC DRAM market In 2013. With fewer companies engaged in the business, a healthier supply-demand balance may be restored to the DRAM industry in 2013.

Samsung will continue to hold a significant share of the global PC-DRAM market in 2013. The longtime industry leader is forecast to grab an about 40% of the market in 2013.

Despite its continued dominance in the PC-DRAM sector, Samsung has accelerated its deployment in the mobile DRAM and server memory chip segments. PC DRAM will account for as low as 20% of the vendor's overall DRAM output in 2013, down from the current 30%.

Hynix is also looking to significantly lower its output for standard DRAM while allocating more capacity for chips used in servers and mobile devices. Its production ratio for PC DRAM will be cut to 30-40% in 2013, a move to shift its focus away from the unprofitable business.

Both Samsung and Hynix are aware that making commodity DRAM will no longer contribute to company profit growth, judging from the already-poor chip pricing. Prices for mainstream 4GB modules, for example, have fallen to US$15 from US$21, the highest level for 2012.

The ability to progress to their next-generation process technologies has been regarded as a key factor contributing to company growth, as the shrinking of technology nodes helps drag down production costs, in theory. Elpida, with its strength in DRAM technology, still failed to survive the brutal DRAM race.

Lack of product diversification could be blamed for Elpida's failure. Elpida owns a complete portfolio of DRAM for PCs, smartphones and other mobile devices, with its advanced process technology enabling the firm to build a solid presence in the mobile DRAM space. However, Elpida's chip offering is less diversified compared to fellow rivals', which also include NAND flash memory.

Micron, previously Elpida's closest competitor in the DRAM sector, is looking to become a one-stop shop for memory solutions. In addition to DRAM and NAND flash, Micron started to offer NOR flash chips after its takeover of Numonyx.

Micron in July 2012 announced its acquisition of Elpida, which filed for bankruptcy protection earlier in the year. On one hand, the combined Micron/Elpida entity is expected to balance against Samsung and Hynix, and also help the industry head towards a healthier state. Micron's share of the global DRAM market will expand to about 24% in 2013, trailing closely behind second-ranked Hynix.

On the other hand, Micron is making progress towards offering a one-stop shop for memory chips with an aim to grow its overall competitiveness against Samsung. Micron's move also suggests that in the post-PC era, the future development of the memory market will become more diverse.

Apple's decision to diversify its chip sources also has encouraged Micron to carry out its merger with Elpida. Apple reportedly has reduced its component orders particularly those for mobile DRAM to Samsung.

DRAM prices to rebound

DRAM prices are set to recover in 2013. Chipmakers have slowed down their pace of expansion, while demand for mobile devices is catching up to offset a slump in demand for PCs.

There has been an oversupply in the DRAM market in 2012 due to suppliers' capacity expansion coupled with sluggish demand for PCs. Tackling the shrinking PC market, DRAM makers have cut down their output for commodity chips since the second half of 2012.

According to DRAMeXchange, global DRAM bit growth will decelerate to less than 50% for the first time in 2012. The bit growth for 2013 is estimated at a lower 32%, as more makers switch their focus to non-PC markets.

Taiwan makers phasing out PC DRAM

Powerchip Technology now has two of its 12-inch fabs produce LCD driver ICs, power management chips, NAND flash and niche-market memory chips on a contract basis. The firm was the first among Taiwan-based makers announcing plans to reduce its exposure to the PC DRAM market.

Powerchip currently has one plant - the P3 - capable of producing DRAM products. The fab, however, will be put on sale in early 2013, implying the company is looking to completely exit the business.

Nanya Technology has reiterated company plans to transform itself into a niche-market memory chipmaker, focusing on server memory and mobile DRAM chips. In addition, Nanya reportedly will stop taking PC DRAM from Inotera Memories from the first half of 2013 - a move to enable Micron to handle sales of all DRAM chips rolled out from Inotera