TrendForce: 3Q13 Global DRAM Revenue Rises by 9%, Samsung Shows Most Noticeable Growth

According to DRAMeXchange, a research division of TrendForce, the Q3 worldwide DRAM revenues showed a 9% QoQ increase despite the price growth in 3Q13 being slower than that of 1H13. The Q3 revenue growth is mostly attributable to the improvements in the structure of the DRAM industry, and is likely to enable various DRAM vendors to sustain their profitability. On average, all three of the biggest DRAM manufacturers were able to enjoy an estimated 2% QoQ increase in their operating margins, with the output of PC DRAM being a key differentiating factor.

TrendForce’s assistant vice president, Avril Wu, indicates that SK Hynix was able to enjoy an operating income growth of approximately 34% --beating Samsung for the second straight quarter-- thanks to the relatively larger output proportion of PC DRAM. While the 2H13 DRAM prices were originally expected to drop amid weak market demand, the fire accident experienced by SK Hynix’s Wuxi plant in September helped turned things around by allowing the ASP uptrend to continue. In 2013, the total worldwide DRAM revenue is likely to experience an estimated growth of 40% compared to the previous year, with the three major DRAM manufacturers in the industry likely to enjoy the most significant profit momentum.

Looking at the branded DRAM manufacturer ranking for Q3, Samsung and SK Hynix each account for approximately 37% and 29% of the market, respectively. A part of the reason for the increased difference between the two manufacturers’ revenue shares is that Samsung has raised the proportion of its PC DRAM as a means to reclaim territory in the market and to improve its profitability. In the long run, the Korean company’s capacity adjustments are likely to become increasingly more flexible as it seeks out other potential vendors to supply mobile DRAM components for its smartphones and increases the DRAM capacity in its Line 16 plant. The added DRAM production is expected to be approximately 30K per month by the end of this year, and is likely to be enough to make up for the yield losses resulting from the company’s 25nm process migrations. In the future, even if mobile DRAM components continue to account for the largest proportion of its product mix, Samsung’s PC DRAM output is still likely to expand from 20% to around 25%. A noticeable impact on the future pricing movements can be expected should such an expansion occur.

With regard to SK Hynix, given that the Q3 PC DRAM price increase is lower than that of previous quarter, its revenue growth in 3Q13 ended up being only 3.7% (compared to the 40.7% growth from 2Q13). Regardless, the Korean company still managed to maintain respectable profit momentum, and saw a 34% increase in its operating margins, the highest among the DRAM manufacturers. Looking ahead to 4Q13, with SK Hynix’s PC DRAM output shrinking from 35% to 25% following the Wuxi plant fire accident, it is predicted that Samsung will eventually be able to reclaim its profit lead. The recovery period of the Wuxi plant, which remains unclear at the moment, will likely play a crucial role in determining 2014’s pricing momentum.

When added together, Micron’s and Elpida’s revenue represents approximately 26.2% of the market, and is only 2% less than that of SK Hynix. The new Micron group’s monthly output level has become the second largest in the industry following the markets transformation into an oligopoly in 3Q13. With the new company group’s 30nm manufacturing process still relatively behind those of its major competitors and Elpida’s average selling price being somewhere below the industry standard, the entire company’s ability to profit in the short term is slightly impacted. However, given that it is planning to gradually migrate to the 25/20nm manufacturing process and is looking to get each of its plants to maximize efficiency by focusing on specific products, Micron's ability to generate respectable profit in the future should not be underestimated. When looked at from the perspective of the PC DRAM market, the new Micron group’s total output already represents one third of the entire industry. Such a status undoubtedly provides a major boost to the company's influence in the market.

Looking at the Taiwanese manufacturers, considering the fact that Nanya has stopped obtaining wafers from Inotera since 3Q13, that its output has undergone a notable reduction following the migration to the 30nm process, and that its PC DRAM production proportion has been lowered, the company was not able to experience much benefit from the market effects of SK Hynix's Wuxi Plant fire accident. Nanya’s revenue, by the end of 3Q13, declined by an estimated 8.3%. Powerchip’s revenues, by contrast, jumped by nearly 75% as the company chose to re-establish its P3 plant’s foundry services in May. The Taiwanese company, additionally, also benefitted from the rise in the price of its foundry services and the increase in orders for the more profitable products. Affected by the gradually lowered featurephone shipments of its clients, Winbond’s business for small density mobile DRAM took a hit, and its revenues slid by approximately 5.2% QoQ. Following the impact of SK Hynix’s Wuxi plant fire accident on specialty DRAM, there is a possible chance that the Taiwanese company’s revenue will rebound during 4Q13.

Observing the entire market, TrendForce believes that the Wuxi plant fire accident will continue to have a major impact on the Q4 momentum and development prospects of the three major DRAM manufacturers in the industry. Samsung is already taking steps to ramp up the proportion of its PC DRAM wafers, for example, while SK Hynix is looking to get its Wuxi plant to fully recover. Micron, in the meantime, has been increasing its efforts to develop its 20nm manufacturing process. Even with the DRAM market becoming an oligopoly and price stability and profits becoming the major focuses within the industry, there’s little question that the competition among the above three manufacturers will continue in the periods ahead.