As 2013 approaches, producers of computer memory are engaging in strategic planning for next year, however, nobody is sure how much to spend on new process technologies as well as manufacturing equipment as demand for dynamic random access memory (DRAM) is getting lower. As a result, it is likely that memory makers will likely reduce output using different methods.
Memory Market Faces Changes
In past years, due to PC upgrade cycles, DRAM suppliers had no choice but to continually advance technology and optimize cost. From the mainstream 60nm process in 2009 to the current 30nm process, every year manufacturers cycled through 1 to 1.5 generations. However, as a result of both a weak global economy and declining PC shipments, and more recently, cannibalization from smartphones and tablet PCs (which has extended the average PC upgrade cycle from 2 to 3 years to 4 to 5 years), DRAM makers have been unable to significantly improve sales.
As for DRAM supply, technology migration has resulted in greater output, which in turn has created a continual oversupply situation on the market these last few years. DRAM industry value continues to shrink, the majority of manufacturers have suffered heavy losses, and capex figures are decreasing every year. Looking ahead into 2013, TrendForce believes that after the storm gradually settles, only the strongest suppliers will remain, which will help bit output closer to the levels of PC+ era demand.
DRAM Makers to Slowdown Transition to New Technologies, Decelerate Bit Growth
Market research company TrendForce indicates that even industry leader Samsung is highly conservative towards next year’s capital expenditures and bit growth figures. In addition to slowing technology migration plans to the 28nm process, Samsung will only migrate to the 25nm process prior to the advancement to EUV technology. Priority will be placed on profit margins, and advanced process technology will be used primarily for mobile DRAM production.
The 30nm process is currently the mainstream technology for market share dominators Samsung and SK Hynix, while the 20nm process is not expected to see over 50% output until after the second quarter of 2013 due to design difficulties. As Samsung’s 20nm technology is being used mostly for the production of server and mobile memory, commodity DRAM output on the 40nm and 30nm processes will continue. Thus, next year’s bit supply growth forecast is a mere 19%, significantly lower than it has been in recent years. Micron and Elpida are currently migrating to the 30nm process; Elpida has finished client testing, and will gradually ramp up production in the coming months.
Taiwanese manufacturers, who have experienced the greatest losses, are slowing technology migration and decreasing PC DRAM production. Nanya plans to phase out commodity DRAM, turning instead to specialty DRAM production and foundry business. Powerchip’s commodity DRAM shipments have decreased significantly as well; capacity is currently down to 20K wafers per month. If manufacturers all slow output, TrendForce forecasts 2013 yearly bit supply growth will hit a low of 22.2%.
Despite of bankruptcies, mergers and acquisitions, the DRAM industry is still a perfectly competitive market. With acute oversupply, buyers have the upper hand in price negotiations. Both contract and spot prices for 4GB modules have fallen to historical lows, but neither market has picked up. There is a limit to how much lower price can fall, hence capacity cuts must be made to shrink supply. In the long term, manufacturers must all make capacity adjustments and lower capex if the DRAM industry is to return to a healthy state in 2013