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Due to the consistent oversupply situation exhibited year after year, the dynamic random access memory (DRAM) industry is generally viewed unfavorably in terms of its financial prospects. While manufacturers have successfully utilized supply tightening strategies as a means to stabilize prices, they also want to reduce their costs. As such, in 2013 the DRAM makers will reduce capital expenditures (CapEx) by 20%, according to TrendForce.

When it comes to the management of financial resources and capital expenditure, manufacturers often face a dilemma: decreasing investment, on the one hand, will make it tough for DRAM makers to compete effectively in terms of controlling production costs. On the other hand, overinvestment not only increases the pressures of maintaining healthy cash flow, it also potentially exacerbates the market oversupply situation. In 2012, most DRAM makers have found themselves in a financial strain when demand took a drastic hit from shrinking PC shipments. Other than to make flexible adjustments to their production mix, the less-competitive, cost conscious manufacturers have also begun to resort to means such as gradual production cuts.  

For 2013, there seems to be a general consensus towards the lowering of DRAM-related capital expenditure. Samsung, which became the only profitable DRAM maker this year due to its vertically integrated supply strategy, is among the major companies to have adopted this view. In the past, the South Korean company has been known to pour in major funds just as other manufacturers are beginning retract or lower their investments. This year, Samsung has reversed its approach. While a necessary transition has been made from PC to mobile DRAM, the company announced it will be largely reducing DRAM capital expenditure by 48% compared to this year. For 2013, the total amount spent is projected to be $110 million, which is a historical low for the company.

Similar to Samsung, other DRAM manufacturers are set to begin lowering their capital expenditure. According to TrendForce, the total amount of invested capital for DRAM in 2013 will be approximately 21% less than it is this year, a trend which is  likely to take a toll on the manufacturers’ technological migration progresses. This is evident in the fact that the 30nm-class processes are still set to be the 2013 mainstream, which signifies a major break from the two-migration-processes-per-year tradition. If the DRAM industry were to undergo any more structural changes due to major shifts in demand, flexible supply control strategies may be the only appropriate measure left to take. Unless appropriate means are utilized, manufacturers within the industry face the possibility of being eliminated altogether.

Tags: DRAM, Business, DDR2, DDR3, Samsung, SK Hynix, Micron, Elpida, Powerchip Semiconductor, Inotera, Nanya

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Comments currently: 2
Discussion started: 12/20/12 09:03:18 PM
Latest comment: 12/21/12 01:44:46 PM

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Hardly surprising, PC even laptop shipments are on the steep decline. Whatever memory that are needed are lower in density and lesser in number for physical modules needed in tablets and smart phones.
0 0 [Posted by: vanakkuty  | Date: 12/20/12 09:03:18 PM]
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