Is the DRAM market ready to bounce?

With worldwide DRAM sales giving a better-than-expected performance in 1Q05 following a seasonal 4Q peak, and some DRAM makers preparing to convert to higher-margin NAND flash memory, the worst may soon be over for the besieged DRAM market, based on new data from iSuppli Corp.

Worldwide DRAM sales dropped 10% sequentially to $6.6 billion, but held double-digit growth year-on-year at 16%, according to the El Segundo, CA-based analyst firm. Profitability among DRAM suppliers declined more dramatically, however: Operating profit margins for top DRAM suppliers fell from double-digit percentages in 4Q04 to single digits in 1Q05, except for only Samsung, Hynix, and Powerchip.

Samsung widened its lead as the No. 1 supplier, increasing its market share by 4.9 points to 31.1%. Nanya Technology Corp. posted the strongest sequential sales growth (+3%) in 1Q05 among the top 10 vendors, and retook the top spot among Taiwanese DRAM suppliers. No. 4 Infineon suffered the biggest sales decline (-18%) among the top four suppliers, but that was due mostly to comparison to inflated revenues from 4Q04, which included a one-time boost from a $156 million licensing and royalty deal with Taiwan’s ProMos Technologies Inc.

While Samsung reigns as the undisputed top DRAM seller, the ongoing battle for second place continues to drag on between Micron and Hynix. The two memory-chipmaking rivals traded blows in 2004, with each taking the No. 2 position in two quarters, and Hynix grabbing the spot for the full year. Now, to start 2005, Micron regained the No. 2 rank by ramping DRAM bit shipments by more than 20%, slightly ahead of Hynix. Micron also posted a 2% decline in DRAM sales quarter-on-quarter, best among the top four DRAM suppliers, compared with Hynix’s 9% sales drop.

iSuppli projects DRAM prices will keep sliding through 2Q05, which likely will result in several suppliers posting losses during the quarter, the first red ink seen since 3Q03. Korean suppliers already are shifting their DRAM capacity to NAND flash memory and its higher margins: Samsung projects its DRAM bit production will be only 4% in 2Q, vs. 16% in 1Q, and Hynix also plans to convert DRAM capacity to NAND in the current quarter (for more about “flexible” fab strategies to shift between DRAM and NAND flash production, see WaferNews, V12n17, May 2, 2005). These moves “will result in a tightening of supply and an eventual rebound in pricing and profitability,” stated iSuppli, and although the analyst firm maintained a “negative” rating of near-term DRAM market conditions, it “sees some signs that the bottom is near.”


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