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【Market View】TrendForce: DRAM Industry Value Grows for Fifth Consecutive Quarter in 4Q13

Published Feb.11 2014,00:00 AM (GMT+8)

TrendForce: DRAM Industry Value Grows for Fifth Consecutive Quarter in 4Q13

According to DRAMeXchange, a division of global research firm TrendForce, although the fire at SK Hynix’s plant in the fourth quarter of 2013 resulted in a decrease in DRAM output, the reduced supply caused DRAM ASP to rise, pushing DRAM industry value to US$9.75 billion, a 5% QoQ increase. Furthermore, the top two DRAM suppliers both saw an increase in profits, with differences attributed to the amount of commodity DRAM production each manufacturer produced.

According to TrendForce Assistant Vice President Avril Wu, looking at the contract price trend for the fourth quarter of 2013, as the September SK Hynix fire interfered with DRAM shipments, average 4GB contract price hit a high of US$34, 20% higher than the average price prior to the fire. As the decrease in DRAM supply caused PC OEMs to turn to Samsung and Micron for products, the two suppliers gained the most from the price surge. Samsung had the most stock available since it has already begun volume production on the 25nm process, and most memory sold at higher prices was Samsung’s. SK Hynix lowered contract prices to avoid losing clients, consequently profiting the least during the price surge. DRAM industry value for 2013 reached US$3.44 billion, for 30% YoY growth.

Looking at branded DRAM market share, Samsung and SK Hynix took 39% and 24% of the market, respectively, with Samsung widening the gap over its fellow Korean supplier. Samsung is maintaining its previous strategy, increasing the ratio of commodity DRAM production while sourcing more mobile DRAM externally. The supplier has already begun volume production on the 25nm process – in comparison to SK Hynix’s 29nm technology and Micron’s 30nm technology, Samsung’s cost structure is significantly better. With DRAM ASP expected to fall slightly this year, the leading memory maker’s profit margin is estimated at 20%, a clear lead over its competitors. Due to the fire, SK Hynix’s market share fell from 28.5% in the third quarter to 23.8% in the fourth quarter, while the supplier’s operating margin fell by around 5%. As SK Hynix is hard at work repairing damages, a full recovery is expected in the first quarter of 2014.

In this year’s revenue ranking, TrendForce combines Micron and Elpida together for the second time, for a total market share of 28.7%, officially surpassing SK Hynix. Benefitting from the price uptrend and decreasing production costs, Micron’s operating margin increased by over 10%, the highest growth in the industry. In 2014 Micron intends to focus on migrating to 20nm process technology, with volume production expected by the end of the year. Commodity DRAM will account for a third of the Micron group’s total production, giving the supplier significant influence over the market.

Looking at Taiwanese memory makers, Nanya is working on migration to the 30nm process, with 80% of total output currently being produced on the new technology. Despite the fact that the supplier no longer received wafers from Inotera beginning in the fourth quarter of 2013, Nanya’s revenue increased by 9.5% QoQ. Powerchip’s DRAM revenue rose 6% - as the supplier has converted to foundry business, they did not profit much from the DRAM price increase. Winbond’s revenue increased by 9.7% due to an influx of orders resulting from the SK Hynix fire – specialty DRAM in particular experienced 11% growth while mobile products saw a 5% increase. Winbond plans to increase capacity to 38K wafers per month this year, while also raising the production ratio of 46nm products.

Looking at the market perspective, TrendForce believes the key to the price forecast lies in the recovery of SK Hynix’s Wuxi plant. With traditionally slow demand in the first quarter and an increase in DRAM output (Samsung moving to 25nm technology, Micron moving to 30nm technology, and SK Hynix’s Wuxi fab recovering) TrendForce maintains its previous outlook – the DRAM price trend is expected to show a slow decline that will ease as the peak sales season approaches. Suppliers will have to rely on technology migration to improve profitability, while staying on the same page to maintain supply levels instead of expanding capacity at whim. If they are successful, DRAM industry value may continue to rise in 2014, giving memory makers stable profits before the looming sub-20nm era arrives.