Analyst: No winners in DRAM “chicken game”

May 2, 2008 – Despite throwing its market-leading weight around by hiking production as competitors retrench, even mighty Samsung couldn’t turn a profit in the DRAM market during a tough 1Q08, according to data from iSuppli.

Global DRAM revenue declined to $5.925B during 1Q, down 7.4% from 4Q07’s $6.4B, right about in line with iSuppli’s projections. Nobody in the sector turned a profit, and in fact “enormous” losses were larger than expected.

Samsung did manage to increase its share of the market from 30.2% to 30.6%, posting $1.8B in sales during the quarter — a 6.2% Q-Q decline from 4Q that was less severe than the overall DRAM market’s 7.4% slide, the firm noted. The company aims to double its DRAM unit output in 2008, vs. iSuppli’s initial estimates of 87% growth. “Samsung is clearly is trying to intimidate the competition with its ‘game of chicken,'” writes Nam Hyung Kim, chief analyst at iSuppli, in a statement. “Amid the myriad uncertainties in the market, Samsung will continue to pursue its ‘game of chicken’ and reap the benefits on its strong balance sheet.”

The analyst firm recently declared that the “worst is over” for the DRAM segment, though softness will linger for a few more quarters. However, if it turns out there is a little more room for declines, OEMs could see significant supply risks if some financially-squeezed DRAM suppliers decide to exit the business. Look for wild oscillations during the next few months and short-term shifts in the supply/demand balance, the firm predicts.

While Samsung pressed ahead and outperformed (slightly) the overall market, No. 3 DRAM supplier Elpida Memory also floored the gas, hiking MB out by 33% in 1Q08 and pushing sales up 3.4% Q-Q to $857M, and its market share from 13% to 14.5%. (Powerchip was the only other top-10 DRAM supplier to show positive sales growth in 1Q.)

Caught in the middle was second-place Hynix, which saw sales slip 8.4% during the quarter, and its marketshare lead over Elpida narrowed from 5.8% in 4Q to 4.1%.


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