The battle for second place DRAM supplier continued in Q1 as Micron Technology Inc. reclaimed the number two ranking from longtime rival, Hynix Semiconductor Inc., iSuppli Corp. reported today.

Samsung held onto its number one ranking with $2.04 billion in Q1 DRAM revenue, down 7 percent sequentially, but leading the market with 31.1 percent marketshare.

U.S.-based Micron and Hynix of South Korea have been locked in a close battle for the second spot rank for the past few years, often switching positions from quarter to quarter. In 2004 alone, the companies traded spaces every quarter, with Micron taking the number two rank in Q1 and Q3 and Hynix claiming the second position in Q2 and Q4. For full year 2004, Hynix took the second place rank, the El Segundo, Calif.-based firm said.

In Q1, Micron increased its DRAM bit shipments by more than 20 percent, while Hynix¡¯s shipments increased by slightly less than 20 percent, the firm said.

Micron posted the best revenue performance among the top four DRAM suppliers in Q1, with a 2 percent decline in sales to $1.1 billion. In contrast, Hynix¡¯s Q1 DRAM revenue declined by 9 percent to $1.08 billion.

Overall, worldwide Q1 DRAM revenue fell 10 percent sequentially to $6.57 billion, marking a 16 percent increase from Q1 2004, iSuppli reported.

DRAM sales at Germany-based Infineon Technologies Inc. contracted by 18 percent to $790 million, the biggest decline among the top four suppliers. Infineon also posted the smallest growth in bit shipments among the top four suppliers but its DRAM sales decline was mainly spurred by the comparison to inflated revenue in Q4 2004. In that quarter, the company received a one-time boost in DRAM revenue from its $156 million licensing and royalty deal with ProMOS Technologies Inc. of Taiwan.

Nanya Technology Corp. reclaimed its position as Taiwan¡¯s leading DRAM supplier in Q1, passing Powerchip Semiconductor Corp. Among the top 10 DRAM suppliers, Nanya achieved the strongest growth, with sales rising 3 percent on a sequential basis to $333 million.

A 10 percent sequential decrease is not a bad performance for the DRAM market in Q1, iSuppli noted, as the quarter typically brings a more precipitous drop in sales compared to the seasonal peak in Q4. However, profitability among the DRAM suppliers declined more dramatically than revenue.

Operating profit margins for most of the top DRAM suppliers in Q1 decreased to the single-digit percentage range, down from double digits in Q4 2004. Only Samsung, Hynix and Powerchip managed to retain double-digit percentage margins.

With DRAM prices continuing to decrease in Q2, a few suppliers are expected to post losses for the period, the first time this has occurred since Q3 2003, iSuppli noted.

Further, decreasing DRAM profitability is prompting Korean suppliers to aggressively shift their DRAM capacity to NAND flash memory, thereby commanding higher margins, the firm said. Samsung announced that growth in its DRAM bit production would amount to only 4 percent in Q2 compared to 16 percent in Q1. Hynix also said it would boost its flash memory production by converting additional DRAM capacity to NAND in Q2.

As a result, the market is likely to see a tightening of supply and an eventual rebound in pricing and profitability. Thus, while iSuppli is maintaining its ¡°negative¡± rating of near-term DRAM market conditions, it does see some signs that the bottom is near.

By: DocMemory
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