Following a revenue low in the first quarter of 2009 not seen since 2001, the DRAM industry ended the fourth quarter at $8.7 billion, up a mighty 43 percent from $6.1 billion in the earlier quarter, said Mike Howard, iSuppli senior analyst for DRAM. Such an outcome was enough to qualify the period in consideration as among the Top 5 quarters of the last decade, he added.
“The DRAM industry in 2009 was one of extremes,” Howard said. “After dropping to revenue levels unseen in more than seven years, the DRAM market improved steadily throughout the year and finished strong at the end of 2009.”
The DRAM industry also realized a positive net income margin of 15 percent in the fourth quarter—the first after 10 consecutive quarters of negative net income dating back to the first quarter of 2007, Howard cites iSuppli statistics as showing. A number of factors accounted for the happy turnaround, including increased bit shipments and higher average selling prices (ASP). And with improving demand-style supply dynamics, DRAM pricing in the intermediate term appears to herald rosy prospects ahead for the industry and augur profitability.
Pricing behavior is unusual and strong; transition to DDR3 continues
The outstanding revenue performance of DRAM in the fourth quarter was driven largely by a firm pricing environment, in which DRAM ASP reached $2.66, a 20 percent increase from $2.21 in the third quarter.
While this is a substantial quarterly gain, a more dramatic comparison can be drawn to equivalent levels in the fourth quarter of 2008. Compared to the ASP during that period of $1.71, the ASP in the final quarter of 2009 represented a huge 55 percent increase—“significant and rare pricing behavior,” according to Howard. Such strong pricing performance puts the industry in a solid position going into 2010, iSuppli projects. “Even if the ASP deteriorated continuously this year—which iSuppli is forecasting—prices essentially will be flat compared to year-ago levels as they come off from such a peak,” Howard observed.
Among DRAM technologies, DDR3, which transfers at twice the data rate of its DDR2 predecessor, accounted for 35 percent of bit shipments in the fourth quarter. In comparison, the older DDR2 still commanded 48 percent of the market during the period but is on a ceaseless decline. Starting the first quarter of 2010, the two will swap places, and DDR3 will account for the lion’s share of DRAM bit shipments.
A key factor that will keep DDR3 pricing above that of DDR2 for much of this year is the high demand profile of DDR3. “The roadmap of Intel Corp. clearly points to a DDR3 future,” said Howard. Already, all of the company’s Nehalem-based chips run DDR3, and a DDR3-only Atom processor is also in imminent release, he added.
Prices for the two DRAM technologies will be kept close as major manufacturers shift production between DDR3 and DDR2 in order to optimize revenue, iSuppli is forecasting.