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Market Watch

DRAM Market Suffers Fall Again After Fleeting Resurgence

Lower shipments and a decline in pricing cause Q3 revenue to dip

December 06, 2012

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After recovering briefly in the second quarter following seven straight quarters of decline, the market for dynamic random access memory (DRAM) has retreated once again, contracting in the third quarter because of lower revenue stemming from weak shipments, according to an IHS iSuppli DRAM market brief from information and analytics provider IHS.

DRAM industry revenue slipped to $6.4 billion in the third quarter, down 8.5 percent from $7.0 billion in the earlier quarter, as shown in Figure 3. The latest decline proved the jump in industry revenue for the second quarter to be temporary and the growth to be short-lived, after all.

The seven quarters of contraction that the industry saw started right after DRAM revenue hit a high mark of $10.8 billion in the second quarter of 2010. Since then, industrywide takings have been dropping steadily, interrupted only by the brief resurgence of the market from April to June this year.

Still, the latest results aren’t as dire as feared, given that third-quarter revenue is still higher than the first-quarter level of $6.3 billion.

The current weakening is due to a sequential drop of 4.3 percent in average pricing, as well as to shipments shrinking by 4.2 percent from the second quarter. While the slump in prices can be readily explained by weak DRAM demand due to sluggish PC sales, why shipments deteriorated is less clear. In all likelihood, however, shipments fell because of production cuts among DRAM suppliers, as well as a slow migration to the 2xn process node that accounts for less DRAM bits per wafer.

The fourth quarter looks more promising as DRAM revenue is expected to tick up, estimated at $6.9 billion, IHS iSuppli forecasts show.

Samsung still on top, but market share changes among some DRAM suppliers

Unchallenged in the business, Samsung Electronics from South Korea retained the top spot, even managing to increase its DRAM share of market. Samsung’s market share rose to 41.9 percent, up from 39.4 percent in the second quarter. Samsung’s average selling price declined faster than the market overall, but the supplier mitigated the loss by aggressively growing its shipments.

Unlike Samsung, however, second-ranked SK Hynix Semiconductor, also from South Korea, saw its market share dip to 23.8 percent, down from 24.5 percent. The company’s revenue dived by more than 11 percent during the period, primarily because of paltry growth in shipments. SK Hynix is projected to grow more strongly in the fourth quarter, so the supplier may well recapture its lost market share.

The largest cut in market share belonged to Nanya Technology of Taiwan, down to 3.4 percent from 4.8 percent. Nanya’s DRAM revenue plunged 35.7 percent in the third quarter—likely a direct result of its new strategy. The supplier is de-emphasizing its focus on PC DRAM and putting new attention instead on specialty memory markets, such as in consumer electronics. But even though the overall importance of the PC DRAM segment to Nanya is waning, the company remains dependent on it for now, and some pain is expected before it transitions out to other new memory sectors.

U.S.-based Micron Technology and Elpida Memory of Japan had a combined market share of 24.8 percent, 1 percentage point lower than in the second quarter. There were concerns earlier that Elpida’s customers would flee after the bankrupt company was scooped up by Micron earlier in the year, but this did not turn out to be the case. And despite ebbing slightly, the collective market share of the two entities during the latest period stood at exactly the same level as in the first quarter.

No dramatic modifications are expected in DRAM market share among the suppliers over the coming year. Incremental changes may result as smaller DRAM companies like Powerchip and ProMOS Technologies, both from Taiwan, continue to reduce their exposure in the volatile industry, resulting in an increase of market share for the other manufacturers.

But without further consolidation in the industry, DRAM market share in 2013 will remain the same, more or less, as it is at present, IHS iSuppli believes.

Read More >> DRAM Revenue Drops in Q3, Market Share Trends Reverse

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