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Thursday, October 5, 2000 Six months has passed by and a lot of things had happened in the memory industry. It is perhaps the time to revise the trends and predictions for the future again. Of course, any predictions can only be based on the past and the present. An in depth analysis of the past and the present should naturally tell us about the future of the memory industry.

Legal Issues in the DRAM Industry

Currently, there are two major issues in the memory DRAM industry:

First is the “Write Protect” patent claimed by Micron Electronics (not to be confused with Micron Technology, the DRAM company). Micron Electronics’ lawyers has been selectively visiting memory module manufacturers pushing them to settle license and pay royalty for the SDRAM modules that has the “WP” pin of the SPD chip connected to pin 81 of the DIMM module. The pin 81 connection is specified on Intel’s PC100 memory standard as for SPD “write protect” control function. The module manufacturers are caught in between. On one hand, they have to be conformed to PC100 specifications. On the other hand, they do not want to pay Micron royalty for making the modules.

While Micron Electronics’ patent was originally filed in 1993, JEDEC (the memory standard setting body) had found documents on discussions about module “Write Protect” dated back to early 1993. Now the question is “prior art” vs. “first filing”. So far, Micron Electronics has not officially sued any company for patent infringement. They are only pursuing license agreements. Until any case filed in court, there will be no clear decision and judgement to be made.

For the time being, memory module manufacturers are either deleting the pin 81 connection on their module design or reviving the old “SPD software protect” standard to circumvent the long term royalty payment.

The second legal case is the more serious “Synchronous Memory Clock” patent claimed by Rambus, Inc. This patent essentially covers all synchronous memories and their controllers. That means Synchronous DRAM as well as DDR devices, modules and system memory controllers.

Presently, Micron Technology is suing Rambus on anti-trust arguing that Rambus is using this patent to force the industry to choose the more expensive Rambus memory. At the same time, Hyundai Semiconductor is suing Rambus based on “prior art”. They claimed that Rambus had learned the details on synchronous memory at a 1995 JEDEC committee meeting before they file amendment for their patent. Counter sues are filed by Rambus in international courts and in Germany. If Rambus has its way, consumer will eventually pay more for SDRAM, and DDR memories.

According to a legal expert, the Rambus patents are legitimate. Mike Farmwald and Mark Horowitz, the founders of Rambus, filed comprehensive patent claims in the early 1990s related to memory bus architectures and synchronous DRAM technology.

"These were very well-written claims, with a full page or two pages of references," the expert said. "The Patent Office later came back and told them to split up the claims and refile them."

In 1999, the Patent Office finally granted a long string of patents to Farmwald and Horowitz, with the patents assigned to Rambus. Based on what the expert said, the Rambus patents are not something the DRAM industry will be able to easily avoid. Of course, the verdict is still up to the courts to decide.

Semiconductor Fabrication Technology and Capacity

A handful of semiconductor companies has announced 12 inches semiconductor fabrication facilities. That includes pure-play TSMC, UMC and Phillips. As for DRAM manufacturer, only Infineon and Toshiba has definite plan for the larger wafer that each facility may cost up to $2 billions. A senior process manager in UMC told me not to believe any news on smooth 12 inches wafer production. He said, “ the 12 inch is a new technology produced with new equipment that nobody understands.” “ It will take 2 years before we can attend optimum yield.”

Just as we have finally evened out the overbuilt DRAM capacity from the bloom days of 1995-1996, we are now seeing new productions as a result of die shrinking. The geometry has been moving from 0.35um to 0.25um, to 0.21um, and to 0.18um. The number of dies per wafer has been tripled in the process. At the same time, the DRAM capacitor sizes are being reduced and capacitance is maintained through innovative trench technology and better dielectric material.

The over capacity and low margin has been forcing some of the Japanese memory manufacturers to look for higher margin non-DRAM products to fill their balance sheet. Essentially, the DRAM manufacturers has been self regulating themselves into a price stability for the 2nd and 3rd quarter of year 2000. As Taiwan is building more DRAM factories at the Tainan Science Park, the balance might tip over. At the same time, new semiconductor factories are being built in Shanghai and Beijing. The Chinese government is determined to catch up with world level semiconductor technologies. With their deep pocket finance and desperation for technology, they will soon caught up.

PC and Network Appliance Market

Competition is more fierce than ever before. X86 MPU producers now include Intel, AMD, Cyrix, Crusoe and National Semiconductor. In the regular PC market, Intel and AMD are working very hard to fill the desktop with higher speed and MHz. The Worldwide Web is also yearning for higher performance “Server Class” PC’s. This thrust is propelling the memory industry into the next generation of higher bandwidth memories like DDR, Rambus and beyond.

On the other hand, network appliances are looking for low cost, and versatile engines that will deliver performance for specific applications. The low cost Cyrix and Geode GX1 processor will be the best candidates. At the same time, the low power Crusoe processor also comes into play on portables and note-book computers. Some of this kind of system will go with point-to-point memories (non module) to push for performance and lower cost. For power as well as cost reasons, network appliance may be staying with the market matured PC133 SDRAM for a long while.

The chipset market that powers the new DDR memories will belong to VIA Technologies, Ali, and Server Works. Intel will fade to the background as a minority share supplier clinging onto Rambus and PC133 memory technologies. Other companies like ATI and Nvedia will supply specialty market chipsets that is graphic centric.

Flash Memory Continue to Grow

For the last six months, flash memory factories are running at full capacity with no slow down in sight. This is attribute to the enormous growth on wireless handset and digital cameras. OEMs like HP and Sony are going all out to sign contract with suppliers for a steady supply. As the technology improves, higher density chips and modules will be available.

The mega-pixel digital camera and the new memory media like Sony Memory Stick, MP3 cartridage all takes up a lot of megabytes. Second tier suppliers will expand to fill the gaps. The market will eventually turn around. However, we do not see that happen in the near future. Therefore, we general remain optimism in the Flash memory market for the next two years.

Major Memory Roadmap

In the next six months, the mainstream DDR memory will depend on the readiness of chipset and the computer OEMs. We estimate that most motherboard manufacturers will be showing their DDR motherboard at the Comdex Show in November 2000. Formal motherboard deliveries, depending on technology issues, will be extended to first quarter 2001. At that time, computer OEMs will do their evaluation and get ready for second quarter production.

We still see that PC133 memory will dominate better part of 2001. DDR memories will fall into line by the middle of 2001 and grow rapidly from there on. Instead, Rambus will retreat to a small percentage of the market.

As for price and stability, we see that October 2000 price will bounce back from the low of September 2000 as the industry is gearing up for the Christmas Season. Through out the year 2001, the most popular memory chip size will be 128Megabit. The most popular module will be 128Megabyte. This will be gradually changed to 256M towards the end of 2001. By that time, most PC133 SDRAM and DDR SDRAM will have the same common die and would be no price differential between the two memories. We do see overall price stability over 2001 with small price glitches in late 2nd quarter. In any case, we see prices to be self-regulated and glitches self-corrected within 6 to 8 weeks.

By: Cecil Ho/ CST Marketing
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