DRAM firms slump in 2Q, but outlook improving

August 4, 2005 – Falling prices amid “tepid demand” pushed most DRAM companies into the red in 2Q05, but some companies are shining as signs begin to indicate a recovery may be underway, according to preliminary data from iSuppli Corp.

Overall DRAM revenues skidded to $5.7 billion in 2Q, a 13% slide from $6.6 billion in 1Q05, with three of the top four producers posting double-digit declines. Shipments actually rose 15% in the quarter, but were more than offset by the punishing 25% decline in ASPs. Only three suppliers eked out a profit from DRAM sales during the quarter: Samsung Electronics Co. Ltd., Hynix Semiconductor, and Powerchip Semiconductor Corp.

Best performance of the quarter goes to Infineon Technologies AG, which nearly kept DRAM sales flat vs. a -13% industrywide decline. The company saw a 44% jump in megabit shipments due to increased production from Asian partners, which contribute a third of its DRAM output: Inotera Memories Inc., Winbond Electronics Corp. and Semiconductor Manufacturing International Corp. (SMIC). Infineon also was helped in terms of pricing by a strong euro vs. the US dollar.

Hynix and Micron Technology Inc. continue to battle for DRAM market share behind runaway leader Samsung. Hynix outpaced Micron in DRAM revenue in 2Q05, and its 19% decline in average selling prices (ASP) was better than the industry’s overall 25% drop (Micron’s ASPs sunk by 28% in 2Q). Also, Hynix managed to offset its ongoing conversion of DRAM manufacturing capacity to NAND flash memory production with a faster-than-expected ramp-up at its new M-10 90nm/300mm facility in Icheon, south of Seoul, which it is converting from 200mm production.

Top-ranked Samsung is in no danger of losing its post, but the giant still saw its market share slip a little bit in 1Q, and its revenues fell by slightly more than the industry average.

iSuppli noted that DRAM prices seemed to turn the corner in July, and as a result the El Segundo, CA-based analyst firm has raised its rating of market conditions from “negative” to “neutral.”


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