Untested DRAMs Hit Broader Market

Untested Memory May Redesign DRAM Market

by Anton Shilov

[ 04/21/2005 | 09:37 PM ]

The current stage of semiconductor manufacturing technology provides extremely strong yields of memory chips and in order to cut the production cost down some makers of DRAMs sell unmarked and untested devices to a number of module makers, who assemble their products and do not test them afterwards as well.

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“This is being done mostly by Taiwanese DRAM makers, who are undercutting the tier-1 guys by selling untested and unmarked parts. The untested yield is high enough that Asian houses are putting them straight into modules and selling them. Any fallout is reworked or returned by the customer and replaced. Apparently the net cost under such a business model is still cheaper than testing the integrated circuits (ICs),” writes Melanie Hollands, an ITMJ business analyst based in New York City for IT Manager’s Journal.

While this is not a significant trend in terms of volume, saving at least $0.25 on the test of every memory chip shipped (and there are at least 8 of them on every memory module) may eventually turn out to be attractive to a large computer maker who arranges the testing of the modules and saves on their purchase. This may lead to another mess in the DRAM market and price tumbling.

“Winbond is one Taiwanese chip company rumored to be producing a relatively small quantity of UTT chips. But chatter in the industry suggests that Winbond may increase its UTT output to 2 to 3 million 256Mbit-equivalent units over the next few months. Winbond's UTT chips are not labeled with the Winbond logo,” Ms Hollands notes.

In theory selling untested and unmarked modules is legitimate. Unfortunately, such memory chips can later be marked with a name of a known brand and sold to the market causing concerns over the quality of such memory chip manufacturer. In the past a number of such situations emerged.

“The major risk as I see it is a batch of modules gets into a major user (think IBM, HP, and/or Dell) and fails (probably in Asia). The user goes publicly ballistic over the combination of faulty material and the supplier's inability to control the quality of its material. The press runs with it and the unlucky DRAM supplier's stock gets hammered. Some time afterward, it emerges that all the DRAM suppliers have this risk and then they all go down,” claims the analyst.

The market observer predicts a number of risks to the semiconductor business if the practice increases:

• A major OEM finding this quality is sufficient and forcing a whole new cost regime on their competitors. A parallel concern is that Dell, or whoever, does some modeling and figures out, with a couple cheap QA steps added, that this really is a lower-cost model. Then it gets really “interesting”;
• Somebody selling untested, mis-marked parts as though they were fully tested, original tier-1 material. Does this practice of shipping UTT chips spread from DRAM into CPUs and other components? Well, Intel's 85 percent share of the installed base of around 200 million PCs is "only" 170 million pieces (i.e., CPUs). Whereas DRAM ships a quantity of around 12 times or more units at maybe 5 percent or less of the CPU's margin. So, the biggest bang for the test buck is in DRAMs. Low-margin parts will be the obvious candidates going forward.
  
  
  • IT Manager’s Journal: Why Untested DRAMs are Getting into More and More Products.