The main reasons are the rising mobile DRAM prices and opportunities provided by the year-end busy season and the releases of new flagship smartphones in 4Q17. Samsung in particular led the charge in hiking up the quotes of mobile DRAM products. Depending on density specifications, prices of mobile DRAM products rose by 5-20% QoQ in 4Q17. DRAM products of other application types also saw price increases in the range of 5-10% QoQ in 4Q17.
“As for 1Q18, the latest survey of PC DRAM contracts for 1Q18 reveals that the PC DRAM prices set by the top three suppliers in January were on average US$33, showing a 5% increase from the previous month,” says Avril Wu, research director of DRAMeXchange. In the server DRAM market, the demand is being fueled by the four major internet companies in North America as they continue to purchase servers for their data centers. DRAMeXchange estimates that prices of server DRAM products will go up by 3-5% QoQ in 1Q18. In the mobile DRAM market, demand is being affected by weaker-than-expected smartphone sales and sliding NAND Flash prices. Furthermore, China’s National Development and Reform Commission has intervened against further DRAM price hikes. As a result, the price upswing in the mobile DRAM market has moderated. The latest analysis puts QoQ increase in the ASP of mobile DRAM at 3% for 1Q18. DRAMeXchange expects the overall revenue to increase further by more than 30% in 2018, reaching US$96 billion.
In the 4Q17 revenue ranking, Samsung was still the leader and again achieved a new record high. With a quarterly total of US$10.1 billion in DRAM revenue, Samsung registered a growth of 14.5% from 3Q17.
SK Hynix and Micron were also in 2nd and 3rd place, respectively. SK Hynix’s revenue for 4Q17 increased by 14.1% QoQ to US$6.3 billion. The top two South Korean memory suppliers managed to capture a combined market share of 74.7% of the global DRAM market in 4Q17 (i.e. Samsung at 46% and SK Hynix at 28.7%). As for Micron, its DRAM revenue for 4Q17 totaled US$4.6 billion, translating to a 13.4% QoQ increase and a global market share of 20.8%.
The effects of rising prices and shrinking processing nodes are also reflected in the operating margins of the top three suppliers. Samsung broke the record again in 4Q17 with its operating margin expanding by another two percentage points to 64%. SK Hynix’s operating margin grew from 56% in 3Q17 to 59% in 4Q17, while Micron too saw an increase of three percentage points between the same two quarters to 53%. The top three suppliers are anticipated to reap greater profits in 1Q18 on account of the rising prices and the cost savings resulted from technology migration.
Samsung will take on additional capacity this year while SK Hynix expects new capacity in 2019
Samsung’s other major focus is the transition to the 18nm process. The company intends to significantly raise the share of 18nm products in its DRAM output during 2018.
With respect to technology and capacity plans, Samsung has decided to take on additional capacity this year to limit the profit growths of its main rivals and to raise the entry barriers against potential Chinese competitors. A new DRAM line will be set up within a section of the second floor of Samsung’s facility in Pyeongtaek, South Korea. The original plan was to have that entire floor devoted to NAND Flash fabrication, but the recent decline in NAND Flash prices compelled Samsung to make the change.
The increase in DRAM production will bring relief to the undersupplied market. At the same time, the slide in NAND Flash prices could be slowed down by the abandonment of the expansion plan. DRAMeXchange believes this revision for the Pyeongtaek fab will not only benefit Samsung but also the development of the entire DRAM industry.
SK Hynix this year will be concentrating on raising the yield rate of its 18nm process. The 18nm technology was formally deployed in 2017, but the supplier has not been able to proceed smoothly in the 1Xnm migration due to technological bottlenecks. On the other hand, SK Hynix maintain its pace for capacity expansion. Its second 12-inch wafer fab in Wuxi, China, is expected to enter operation in 2019 at the earliest.
Micron is on track with its migration to the 17nm technology. Currently, more than 90% of the total output from Micron Memory Taiwan (Rexchip) comes from the 17nm process. The transition is expected to complete at the start of 2Q18. Micron Technology Taiwan (Inotera) will commence shifting its production from the 20nm to the 17nm process in the middle of this year. Micron Technology Taiwan aims to have about half of its total capacity on the 17nm by the end of 2018 and to finish the transition in 1H19.
Regarding Taiwan-based suppliers, Nanya’s revenue advanced by 26.9% QoQ in 4Q17 on account of the price uptrend and the above-expected yield increase for its 20nm process. The migration to the 20nm technology has significantly improved Nanya’s cost structure. And as a result, the supplier’s operating margin grew by 7 percentage points between 3Q17 and 4Q17 to 38.9%. Going forward, the steady increase in the 20nm yield will help Nanya to further raise its profit.
Powerchip has decided to concentrate on foundry services for IC design houses (e.g. ESMT and AP Memory) and producing high-margin products. The company’s DRAM revenue for 4Q17 was on par with the result of the previous quarter, showing no obvious growth.
Winbond’s 4Q17 DRAM revenue dipped by 2.2% QoQ owing to the company’s decision to set aside wafer capacity for NOR Flash production.