For some time, there has been a shortage of select DRAMs, especially next-generation DDR3 parts, due to market demand for high-end notebooks, servers and other products. Shortages of DDR3 have prompted a buying spree for older DDR2 parts, causing shortages for those devices.

Elpida Memory Inc., Hynix Semiconductor Inc., Micron Technology Inc. and Samsung Electronics Co. Ltd. are separately ramping up their production of DDR3 devices, but some vendors do not have the fab capacity. For years, DRAM capital spending has lagged, due in part to losses and the ongoing memory downturn.

Hynix and Samsung dominate the DDR3 market, with each vendor currently holding a 45 percent share of the market, according to data provided by Hynix.

Now, business is looking up. Citing the DRAM and other businesses, Samsung recently said it expects to report third quarter sales of approximately 36 trillion won ($30.8 billion) and an operating profit of roughly 4.1 trillion won ($3.5 billion). For the second quarter of this year, Samsung (Seoul) reported a profit of 2.52 trillion won ($2.2 billion) on sales of 32.51 trillion won ($27.9 billion).

"The PC market is better than we thought, but we're cautious," said Keich Lee, manager of memory marketing for Samsung. "We're at a sensitive point" in terms of market demand.

Lee confirmed reports that there are shortages of DDR3. Shortages of "DDR2 are more severe than DDR3,'" Lee said, at the 11th International Semiconductor 2009 (i-Sedex) event here. "DDR2 prices (surpassed) DDR3 at the end of September."

Last week, average spot pricing across all DRAM densities and technologies increased by 2.8 percent to $2.13, according to market research firm Gartner Inc. ''This is a 52-week high, on a 1-Gbit equivalent basis. Current pricing has moved up 168.8 percent from the low prices of 52 weeks ago," according to a Gartner report.

DDR2 demand is strong. Last week, "demand for both 1-Gbit and 512-Mbit DDR2 devices in the spot market was still strong. Average spot pricing for the 1-Gbit DDR2 device increased 2.8 percent in comparison with 1.6 percent for DDR3 devices," according to Gartner. "The gap between 1-Gbit DDR2 and 1-Gbit DDR3 shortened to only 1.3 percent. Spot pricing for the 512-Mbit DDR2 device reached 98 cents, close to the total fabricated cost with a 72-nm geometry. The last time we saw 512-Mbit DDR2 at just 98 cents was more than 14 months ago, in July 2008."

Still to be seen, however, is when demand will slow. DRAM demand is projected to wane in the first quarter of 2010, as that period is normally the slow season, Lee said.

DDR2, the dominate SDRAM type right now, is geared for older notebooks and other products. Intel Corp. is pushing the market to DDR3, as the chip giant will shortly end its chip-set support for DDR2.

As a result, Samsung and others are ramping up their DDR3 production. Samsung expects to see the "crossover point" between DDR2 and DDR3 in the first half of 2010, Lee said. The company is shipping 56-nm DRAM designs and is ramping 40-nm-class products.

Hynix is also ramping up its DDR3 production. Some 50-to-55 percent of its total output will be DDR3 by year's end, up from 40-to-50 percent now, according to the company. Hynix is shipping 54-nm DRAMs and is ramping 44-nm products.

By: DocMemory
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