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Trendforce: Global DRAM Industry Value Increases 11% in Third Quarter

12 November 2014 Semiconductors Ken Kuo

Samsung, SK Hynix and Micron, the world’s top three global memory manufacturers, boosted production capacity in the third quarter to meet Apple’s immense demand for mobile memory as it launched the iPhone 6, according to DRAMeXchange, a division of the Taiwan-based market intelligence firm TrendForce. The reduction in commodity DRAM production caused contract prices to rise, and commodity memory products had the highest margins in the third quarter. As a result, DRAM industry value reached US$12 billion, an 11% increase over the second quarter and a new quarterly revenue record. 

As memory makers’ production ratios are well adjusted and they continue to increase next-generation output, their profitability is expected to see further improvement. Samsung leads with an operating margin of 42%, while SK Hynix is close behind at 40%. Micron, still using the 30nm process as its main technology, has a gross margin of 24.1%. However, given the DRAM oligopoly, profits are expected to remain stable and DRAM industry value is projected to reach US$47.1 billion for 2014. Although quarterly decline is forecast for average selling price in 2015, as bit output continues to increase, DRAM industry value is expected to do so as well. 

DRAM Manufacturer Highlights 

The yield rate for Samsung’s 25nm process reached 85% in the third quarter, resulting in 18.4% quarterly revenue growth. As next-generation technology is reducing manufacturing costs, Samsung’s third-quarter operating margin was 42%, the highest of the major memory makers. 

SK Hynix also made a breakthrough on yield rate and rapidly advanced to the 25nm process, but due to output losses from the initial stages of migration, revenue only increased by 7% over the prevous quarter. However, SK Hynix’s revenue is expected to increase significantly in the fourth quarter as production picks up. 

As for Micron, since the company’s strategy focuses on mobile and server memory as opposed to commodity products, commodity DRAM revenue was not as high as that of the Korean makers. Still, that revenue grew 4.7% on a quarterly basis. Micron is manufacturing mainly on the 30nm and 25nm processes, with test production to begin on the 20nm process at the end of the year. If all goes well, Micron should have 80K wafers per month dedicated to 20nm production by the end of 2015, which would certainly help the manufacturer catch up to its competitors. 

Although Inotera is now a subsidiary of Micron, due to Micron’s price negotiation structure, Inotera had the highest operating margins of all DRAM makers, 51.9% - a slight decline over the second quarter. Inotera’s capital expenditure for next year is set at NT$50.0 billion, which will be spent on acquiring the same equipment as the Hiroshima fab for successful migration to the 20nm process. 

Among Taiwanese memory makers, Nanya is focusing on the production of specialty memory and working with other manufacturers to produce commodity and mobile products. Nanya performed well in the third quarter. Revenue grew 10.2% over the quarter to June and operating margins were 41.6%. 

Winbond continues to see growth in specialty DRAM and low-density mobile DRAM sales, with a 5.7% quarterly revenue increase and 12.2% operating margins in the third quarter. Winbond has increased capacity to 40K wafers per month this year and is expected to aim for 44K wafers per month in 2015. 

Powerchip’s DRAM revenue fell by 5% in the quarter to September, mainly due to a decline in foundry service prices. The memory maker is expected to expand capacity at its P3 fabrication plant next year, which will increase both production capacity and profits. 


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