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Contract DRAM prices increased by five percent in the third quarter of 2017, compared to the previous quarter, driving record quarterly revenues for DRAM makers, according to DRAMeXchange, a division of TrendForce. Due to continued tight supply and limited bit supply growth, DRAM revenue increased 16.2 percent sequentially.
The market outlook for the fourth quarter indicates an average price hike of about 10 percent, according to DRAMeXchange’s research director Avril Wu. But prices could rise by as much as 20 percent for some products.
“Most PC OEMs have concluded negotiating their contract prices with DRAM suppliers for this fourth quarter,” Wu said in a statement. “Contracts with first-tier DRAM suppliers show that the prices of PC DRAM modules have now risen above $30 and maintained around $30.50 on average, amounting to a seven percent hike from the third quarter. This price increase is mainly attributed to the influence of the booming mobile DRAM market, which is in turn fueled by the limited product supply and the releases of flagship smartphones during the traditional busy season of this year’s second half.”
In the mobile DRAM market, Samsung has raised the price quotes for its products, and smartphone makers have no choice but to accept the price increases, said Wu.
“Depending on the capacity specifications, prices of mobile DRAM products could go up by 10 percent to 20 percent in the fourth quarter compared with the third,” she added. “As for the server DRAM market, strong demand during the fourth quarter also will push up contract prices of memory modules by six percent to 10 percent from the previous three-month period.”
South Korean suppliers still hold the lion’s share of global revenues, pegged at 74.5 percent in the third quarter of 2017. The top three suppliers – Samsung, SK Hynix and Micron – all maintained their top positions. Revenue market shares in Q3 for the top three suppliers were 45.8 percent, 28.7 percent and 21 percent, respectively.
However, Wu expects higher DRAM tags will narrow the market share gap with Micron gaining some share in the fourth quarter.
In Q3, Samsung’s revenues grew by 15.2 percent from the second quarter, reaching a “historic high” of $8.8 billion. SK Hynix’s revenue rose by 22.5 percent, reaching $.5.5 billion, and Micron’s revenue increased by 13 percent, recording $4 billion in sales.
“SK Hynix’s ASP was higher than Micron’s during the third quarter, and therefore SK Hynix was able to widen its market share lead over Micron,” explained Wu. “However, the situation will reverse in the fourth quarter with Micron having the highest ASP and posting the largest overall price increase versus the top two Korean suppliers. We can also expect Micron to shrink its market share gap with second-place SK Hynix in the year’s final quarter.”
Taiwan’s domestic DRAM suppliers didn’t do as well in the third quarter. Nanya posted 5.3 percent growth in Q3, while Winbond posted 8.7 percent growth. However, Powerchip’s revenue dropped by 3.6 percent due to more foundry work for other memory companies such as ESMT and AP Memory, which resulted in a capacity shift from DRAMs to other products.
Wu expects the top DRAM suppliers to continue raising their operating margins due to increased prices. She believes SK Hynix and Micron will focus on improving yields and technology migrations while Samsung considers capacity expansion as a way to maintain its market leadership.
“By increasing its output, Samsung will moderate the undersupply situation and constrain the price increases of its competitors,” added Wu. “In sum, expanding capacity and maintaining a one- to two-year technological lead over its rivals will reinforce Samsung’s leadership in the long run.”
Meanwhile SK Hynix’s 18-nm process will roll out small volumes of product at the end of the year and is building its second 12-inch wafer fab in Wuxi, China, which should be operational in 2019 at the earliest, according to Wu. Micron Memory Taiwan (formerly Rexchip) is expected to have a yield rate of at least 80 percent at its 17-nm process by the end of the year and Micron Technology Taiwan (formerly Inotera) plans to migrate half of its production capacity to 17-nm process in 2018.
As suppliers continue to build their capacity and migrate to the latest technologies, demand for memory devices also will continue to grow. DRAM memory capacity per smartphone will rise by more than threefold, reaching about 6 GB by 2022, and DRAM capacity for servers will rise by more than 0.5 TB by 2022, according to Santosh Kumar, senior technology & market research analyst at Yole Développement (Yole).
“Growth in these markets is fueled by applications such as deep learning, data centers, networking, AR/VR, and autonomous driving,” said Kumar, in a statement.
“On the supply side, player consolidation coupled with the difficulty in migrating to advanced nodes due to technical challenges, along with higher investment and migration from 2D to 3D NAND, has caused a shortfall in DRAM and NAND flash supply,” he added. “DRAM players want to retain high ASP and profitability to justify their huge capex investment for advanced node migration, and as such are not inclined to increase capacity.”
