DRAM Prices Continue to Surge

Contract prices of PC DRAM modules are expected to rise nearly 40 percent on average, sequentially, in the first quarter of 2017, and continue to climb in the second quarter, according to DRAMeXchange, a division of TrendForce. In addition, capacity expansion by suppliers won’t impact the market until the second half of 2017, resulting in worsening supply issues, according to the market research firm.

In the fourth quarter of 2016, rising prices for DRAMs in combination with peak season demand for smartphones resulted in 18.2 percent sequential revenue growth in the global market, according to DRAMeXchange.

"Rising demand for mobile DRAM kept squeezing the industry's production capacity for PC DRAM," said Avril Wu, research director of DRAMeXchange, in a statement. "Contract prices of PC DRAM modules increased by more than 30 percent sequentially on average in the fourth quarter due to insufficient market supply. Server DRAM lagged behind PC and mobile DRAM in terms of price hike during the same period, but it is expected to catch up in the first quarter of this year."

Revenue rankings of the top three DRAM suppliers in 2016 – Samsung, SK Hynix and Micron – remained unchanged in the fourth quarter of 2016, and all three suppliers significantly increased their operating margins.

Wu’s analysis of the top three suppliers indicate continued growth and migration to advanced technology.

“With the exceptional third-quarter result as the base, Samsung managed to achieve a 12% sequential growth in the fourth quarter, totaling US$5.9 billion and taking 47.5% of the global DRAM market. SK Hynix also did well revenue-wise in the same period, posting a 27.3% increase compared with the prior quarter to reach US$3.3 billion. SK Hynix's global market share was around 26.7%. Third-place Micron registered a sequential growth of 24.4% and captured 19.4% of the global market. Together, the global market share of the two leading South Korean suppliers came to 74.2% in the fourth quarter.

Upswing of prices pushed up suppliers' fourth-quarter operating margins as well. Samsung's operating margin went up to 45%, while SK Hynix saw an increase from 25% in the prior quarter to 36%. Micron's operating margin made a huge leap from 3.7% in the third quarter to 14.9% in the fourth. Going forward, the continuing price uptrend means that suppliers will enjoy rising profit in the first quarter of 2017.”

Technology Migration

In terms of technology migration, Samsung designated its fab Line 17 for the deployment of the 18-nm process in 2017, and is considering other fabs for adoption, according to Wu. “The supplier's target is to have at least 40 percent of its total DRAM output coming from the 18nm process by the end of 2017”.

Wu said SK Hynix will focus on raising the yield for its 21 process and will begin to migrate to the 18-nm process in the second half of 2017. “The supplier wants to have the technology ready for mass production as soon as possible,” she said.

Micron’s subsidiary Micron Memory Taiwan has started mass production for its 18-nm process in January, and plans to transition most of its production capacity to the technology by the end of this year, according to Wu. “If this process goes well, Micron may also have the newly acquired Inotera to adopt the 18-nm production in the second half of 2017”.

Taiwan-based suppliers also continue to transition to advanced technology with several recording double-digit sequential growth, according to Wu. These include Nanya, Powerchip and Winbond.