Rocky road for top-ten DRAM makers

The second quarter of 2008 faced the top-ten DRAM suppliers with poor profits amid sequential megabyte unit growth, according to analyst firm iSuppli, after months of losses.

Samsung maintained its number-one position in the DRAM market with more than 30 per cent market share recorded during the second quarter of 2008 while Qimonda’s position dropped to just 9 per cent market share during the quarter.

Qimonda, which captured 16 per cent market share just two years ago, has now lost 7 per cent of that growth as other DRAM suppliers have forged ahead.

One of the more noticeable developments coming from suppliers’ Q2 results is that the industry unit growth has not slowed down, at least, not yet.

“The industry megabyte bit growth grew by a stunning 17 per cent sequentially during the second quarter, blowing iSuppli’s forecast of 10 per cent,” said Nam Hyung Kim, director and chief analyst for memory ICs and storage systems at iSuppli. “The unit growth doesn’t seem to be slowing down either and is even higher than that of the first quarter. The positive side is that the PC market has been sound. However, oversupply may be inevitable in the third quarter due to OEMs’ aggressive inventory build-up during the second quarter”

Although Hynix grew its DRAM sales by 20 per cent, Elpida increased its sales by 22 per cent, keeping a market share distance of 4 percentage points between two. Hynix gained nearly 20 per cent of the market while Elpida’s market share increased to more than 15 per cent during the quarter.

Elpida, along with its foundry partner Powerchip, increased its megabyte unit explosively by 26 per cent and 38 per cent, respectively. “The market share battle between Hynix and Elpida could delay the market recovery,” Kim noted. “Elpida clearly wants to be number two soon while Hynix will try to reduce its NAND growth and to increase DRAM production to retain its market share.”

But all of the DRAM suppliers could face turbulent times ahead as after experiencing a mild recovery in the second quarter, the global DRAM market is showing renewed signs of weakness, with prices expected to fall during the third quarter due to bloated inventories, according to iSuppli.

Following months of losses, a few top-tier suppliers managed to attain profitability starting in June and a handful are expected to do so in the third quarter.

However, the market is showing renewed warning signs, with OEM contract prices for DRAM likely to decline in August and September. The main question now facing the industry is how much prices will decline during the third quarter: iSuppli believes it will be over 10 per cent from the current level.

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