2014 has been a fruitful year for the DRAM industry. Tier-one manufacturers, benefiting from the global smartphone boom, have all stepped up mobile memory production. According to DRAMeXchange, a research division of TrendForce, mobile memory will account for 36 percent of overall DRAM production this year and is very likely to surpass 40 percent of production in 2015.
“Because of high demand for mobile memory, DRAM manufacturers have somewhat reduced standard memory production, keeping module prices high,” said Ken Kuo, Assistant Vice President at DRAMeXchange. This year, the 4GB module has been selling for about US$32 while the average margin for standard memory has been above 40 percent, Kuo said, adding: “All DRAM manufacturers are staying profitable. The increasingly oligopolistic nature of the market and changes in market demand will stable the development of the industry in 2015.”
The 5 key trends to follow in the DRAM industry in 2015:
(1) Overall DRAM industry revenue will grow 16 percent year-on-year. Growth will be slower than in 2014 while manufacturers will remain very profit oriented
The DRAM industry has become oligopolistic and the remaining top 3 DRAM makers will all focus on sustaining profits first and carefully adjusting production and product types. Resilient global demand for smartphones will compel manufacturers to prioritize the production of mobile memory, squeezing standard memory production and pushing up standard memory prices. “Commodity memory has become a cash cow for DRAM manufacturers,” Kuo said. DRAMeXchange forecasts that the total revenue of the DRAM industry in 2015 will reach US$54.1 billion while annual growth will be 16 percent. “2015 should be a year of stable growth and profitability for the DRAM industry,” Kuo added.
(2) Samsung and SK Hynix both have new plants in place and will adjust production capacity according to market demand
Samsung and SK Hynix both announced plans to build new plants in 2014 amid rumors of increasing competition between the two DRAM giants. In fact, while Samsung was expanding Line17, its Line16 was gradually returning production capacity from DRAM to NAND Flash at the same time. Meanwhile, SK Hynix planned to use its M14 for small-scale production in the fourth quarter of 2015, while larger-scale production is slated for 2016. Overall, market demand for DRAM is still growing and production facilities are ready. As a result, as long as wafer production goes as planned and technology processes evolve, DRAM manufacturers will be able to maintain current levels of profitability, despite prices falling on a quarterly basis.
(3) Mobile memory becomes the global mainstream standard and LPDDR4 will be seen in vendors’ flagship smartphone models next year
In 2014, as smartphones became more affordable and packed with features, smartphone shipments increased and consumers in emerging markets began to regularly upgrade their handsets. “As the global smartphone market grows, mobile memory is occupying an increasingly large share of the memory market: 40 percent compared to the 27 percent that standard memory has,” Kuo said. “Mobile memory is becoming a mainstream DRAM product.” At the same time, from the standpoint of mobile memory, the mainstream standard will still be LPDDR3, which accounts for more than 60 percent of production in 2015, Kuo said, adding: LPDDR4 will be seen in flagship smartphones in 2015. It is superior to LPDDR3 in terms of power saving and speed. It is expected to have a 15 percent market share out of total Mobile DRAM capacity in third quarter of 2015.
(4) DRAM players to compete on 20nm migration; increasing capital expenditure a barrier
Samsung and SK Hynix’s 25nm process technologies became mature in the second half of 2014. Regardless of the yield rate or wafer volume, both of the South Korean manufacturers’ chips became mainstream in the DRAM industry. Regarding 20nm process technology, Samsung has moved to the testing stage and SK Hynix’s product is expected to enter the market in the second quarter of 2015. By comparison, Micron only plans to use the 20nm process technology standard in memory storage produced by Inotera. Micron’s improvement rate is lower than that of the two large South Korean companies as its entry into the sector was later, but is still targeting 80K wafer start capacity by the end of 2015. Since more equipment is necessary for the 20nm production process, requiring greater capital expenditure, the rate at which the 20nm migration takes place is expected to slow.
(5) DDR4 technology will enter the server field first and could surpass 50 percent market share by the end of 2015
Under Intel’s leadership, DRAM manufacturers cooperated to make DDR4 technology enter the server field first. “Server DRAM needs to be fast and stable, with low voltage,” Kuo said. “In accordance with JEDEC regulations, DDR4 electricity is only 1.2V and the speed is expected to reach 3200 Mhz. Meanwhile, the price gap between DDR4 and server-based DDR3 is shrinking. DRAMeXchange projects that DDR4 memory will officially become mainstream in the server market as early as the end of 2015.