For quite a considerable length of time, the face of DRAM industry has been marred by countless erratic price hikes and declines, buyouts and uncertainty. But for one industry analyst, the market has reached a point of stability. The storm has calmed.

With far fewer DRAM players left in what has historically been one of the most tumultuous of all chip sectors, it appears as though the wide swings in the supply and demand balance are a thing of the past.

Efforts to garner market share are no longer DRAM companies' primary objectives. Instead of investing billions of dollars to build large fabrication facilities, leading DRAM makers, including Samsung and Micron, are pursuing strategies that will ultimately bring higher pricing, gross margins and profitability. With increased demand from non-traditional markets, such as smartphones, tablets, networking and automotive, DRAM sales growth isn't dependent on the health of only the PC market anymore, resulting in greater stability, growth and innovation.

"DRAM is going to remain stable because you have mature, rationale companies that all understand the market. They all understand the trade-offs and they are going to make the wisest financial decisions," said Mike Howard, DRAM and memory analyst with market research firm IHS. "The end-game for DRAM for years has been if we can get down to three players, everyone will make money."

There's plenty to go around. Worldwide DRAM revenue in 2013 rose 32.5 per cent, to $35 billion, and is expected to increase 19.4 per cent, to $41.8 billion this year, with slower, but still robust growth of just two per cent, to $42.5 billion in 2015, according to IHS estimates.

"We expect strong demand for server DRAM and graphic DRAM, as well as consistent growth for the PC and mobile markets, while there is growing need for high-density PCs and LTE-based mobile devices," said Jim Elliott, corporate VP of memory marketing for Samsung Semiconductor Inc.

Samsung is the market share leader, accounting for 37 per cent of DRAM revenue in 1Q14, compared with 26 per cent in 1Q07, according to IHS. The second leading player is SK Hynix, which represented 28 per cent of Q1 revenue in 2014 vs. 23 per cent in 1Q07. But the company with the biggest gains is Micron Technology, which came in at 27 per cent in the latest quarter, compared with just nine per cent seven years ago.

For Micron Technology, strong organic growth combined with its acquisition of Elpida Memory pushed the company to one of the top three spots. However, Micron does not plan to expand its wafer growth this year, but instead focus on the value DRAM can bring to a system, according to Brian Shirley, Micron's VP of memory technology and solutions.

"We are in a better position to engage our expansion plans based on return of capital, a real return rate, as opposed to trying to keep up a certain market share minimum," Shirley noted.

This year, Micron is on track to spend between $2.5 billion and $3.2 billion in capital expenditures, which will be used to advance particular process nodes and shrink both DRAM and NAND lithography, he added. Before Micron decides to bring on additional wafer output, bit demand would have to be consistently above 40 per cent, compared to the current CAGR in the low 30 per cent range. By focusing on optimising existing capacity, Micron believes that it can continue to yield healthy gross profit margins, which reached 34 per cent in Q2 of fiscal 2014 compared to 32 per cent in Q1 of fiscal 2014 as a result of a higher DRAM gross margin.

In addition, Micron said it expects to see overall DRAM industry wafer production down about five per cent in 2014 as the result of DRAM to NAND conversions and the ongoing increase in process complexity as geometries shrink.

However, Micron's die is not as small as its competitors, according to IHS's Howard. "It is not as far along the lithography path as its Korean rivals," he stated, adding that the company's costs are a little bit higher. "We'll see if that changes now that they have twice as many wafers as they had 12 months ago."

Meanwhile, Samsung will focus on strengthening its DRAM product line-up by increasing the proportion of 20nm-class DRAM and providing more differentiated value for the server market, while meeting demand for high-density DRAM and next-generation solutions like DDR4, according to Elliot. The company didn't provide any more details.

SK Hynix has an aggressive cost structure, as competitive as Samsung's, IHS's Howard indicated, adding that it's not clear whether they have a defined differentiation strategy. Still, SK Hynix is a key supplier, especially for DRAM buyers who prefer not to use Samsung, since it is considered one of their competitors. "They are the non-Samsung alternative," Howard stated.

In 1Q14, SK Hynix said it fully recovered from its Wuxi, China, fab fire that occurred in September 2013. It will begin mass-producing PC and server DRAMs using its 2Ynm class process technology in full scale this quarter. It also plans to move mobile DRAM production to 2Ynm in H2 in an effort to build capacity to meet growing demand from mobile devices, which includes smartphones and tablets, nontraditional applications of the DRAM sector.

As mobile platforms quickly become one of the DRAM industry's major target markets, several changes are occurring. For example, the design process for a smartphone is a lot different from that for a PC, which is usually equipped with a DIMM. In smartphones and even some laptops now, the memory is soldered to the motherboard.

"The mobile platform is the model going forward instead of a large module that you just plug in," Howard said.

Another key development in system design is how memory is moving closer to the processor, helping to boost speed or improve power consumption. "Micron has been a little bit more adventurous in pursuing alternative design," he stated.

As part of this trend, Micron is pioneering a particular kind of memory called a hybrid memory cube that allows for much denser stacking of DRAM that can be placed closer to the processor to achieve higher performance, according to Micron's Shirley.

"It really unleashes an order of magnitude of more bandwidth for the processor to take advantage of, that in conjunction with other forms of where are called in-package memory technology, really trying to get the DRAM much closer to where the processing happens, and that is starting to happen."

By: DocMemory
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