The downward pricing spiral for global DRAM market severely impacted suppliers in 2008 and will continue to do so in 2009, according to recent research from iSuppli Corp.

Global DRAM unit shipments achieved nearly zero sequential growth in Q4 2008 as ASPs (average selling prices) declined by 38%, above the historical annual average of 30%, according to data from iSuppli.

On the flat shipments and price drop, global market revenue amounted to $4.2 billion in the December quarter, short of the research company's forecast of $5.8 billion. For the entire year of 2008, revenue was $23.6 billion, below iSuppli’s preliminary estimate of $25 billion.

Much of the ASP drop was due to oversupply in the memory market. That oversupply has encouraged some suppliers to cut capacity and costs, closing fabs and laying off employees, attempting acquisitions to lower overall industry competition and licensing fees, delayinbg joint ventures, and, in some cases, exploring bankruptcy options.

According to iSuppli, the DRAM downturn forced five of the top 10 market suppliers to report sequential Q3 declines in revenue; by Q4 all of the top 10 suppliers saw their revenue decline compared to the previous quarter. Even Samsung, the long-time number one DRAM supplier, was not impervious to the market conditions.

“With its dominant market share, huge capital investments and industry-leading costs, Samsung generally has been able to outperform the overall DRAM industry—in both good times and bad,” said Nam Hyung Kim, chief analyst for iSuppli, in a statement. “No wonder the company still holds the best DRAM profit margin in the industry. However, amid the recent global economic turmoil, Samsung now is no longer immune and its losses are expected to continue this quarter.”
 
The news is not all bad, however. ISuppli reported that number two DRAM supplier Hynix increased its share to 20.8% in Q4, up from 19.2% in Q3. Although Hynix suffered a 32.7% decline in revenue in the quarter, it managed to outperform the overall industry decline of 37.9%.

Meanwhile, number four DRAM supplier Micron saw revenue decline by only 16.4%—the smallest drop among the top-10 DRAM suppliers—and posted the biggest market-share increase among significant DRAM makers in Q4, with its portion of industry revenue rising to 13.8%, up from 10.2% in Q3.

“Although Micron’s production output growth was about 20%, the company’s shipment growth hit 36% sequentially, resulting in its relatively strong performance,” Kim said. “More importantly, Micron has reduced its market share gap with Japan’s Elpida, dwindling to 1.7 percentage points in the fourth quarter, down from 5.5 percentage points in the third quarter.”

Number three supplier Elpida claimed 15.5% of DRAM revenue market share in Q4, down slightly from its Q3 stake. However, Elpida’s annual 2008 market share of 15.3% compared to 12.2% for the full year 2007 and was the biggest increase among the top 10 suppliers on an annual basis, according to iSuppli's data.

ISuppli noted that DRAM suppliers have been selling their products at prices below their cash costs since Q4 2007 and that dwindling demand for the memory has further exacerbated the ASP decline. The industry’s operating profit margin fell to negative 65%, and iSuppli said it believes the total operating losses reached $2.6 billion in Q4 and $7 billion in 2008. Further reinforcing that point, iSuppli reported that the industry’s Q4 operating loss of $2.6 billion alone exceeded the $2.1 billion operating loss for the full year of 2007.

On the poor Q4 results iSuppli has reduced its 2009 DRAM revenue forecast to $20 billion, or down 15% from 2008. Megabyte shipment growth for the year is expected to amount to only 22%, significantly down from 66% in 2007, according to the company. The DRAM per-megabyte ASP will drop by 31% for the year, iSuppli estimated.

By: DocMemory
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