The market for dynamic random access memory (DRAM) is showing signs of weakness, following a fall in revenue not just for one of the industry’s key players but also for a collective pool of smaller producers—all sharing the same woes stemming from a lackluster PC market, according to an IHS iSuppli DRAM market brief from information and analytics provider IHS.
On September 27, U.S.-based Micron Technology Inc. announced that earnings from its DRAM Solutions Group had dipped 9.7 percent to $677 million during its most recent fiscal fourth-quarter period, which best aligns with the third quarter in the regular calendar year. Only a quarter earlier in its fiscal third, Micron’s DRAM revenue had been up 23.4 percent to $750 million. Micron’s shipments for the fiscal fourth quarter were down a sequential 9 percent, with prices essentially flat.
Were Micron’s results indicative of a larger similar occurrence in the DRAM industry at this time? Revenue data from a group of five Taiwanese DRAM suppliers suggest that Micron was not unique in its quarterly loss. The picture coming out of the Taiwan DRAM space showed that revenue there for the calendar third quarter—corresponding in time to Micron’s fiscal fourth—also fell, like Micron’s. The Taiwanese, in fact, incurred a bigger loss as a group, with combined revenue shrinking to NT$25 billion (about US$850 million), down 14 percent from NT$29 billion.
The Taiwanese companies are individually smaller than Micron. The Idaho-based manufacturer is ranked fourth overall in the DRAM industry, behind South Korean entities Samsung Electronics and SK Hynix Semiconductor, as well as third-placed Elpida Memory Inc. of Japan. The DRAM suppliers from Taiwan that share Micron’s afflicted quarterly revenue include Nanya Technology Corp., Inotera Memories Inc., ProMOS Technology Group, Winbond Electronics Corp. and Etron Technology Inc.
Among the Taiwanese, Nanya has seen the most significant revenue decline, even if it has also enjoyed the highest revenue in the group. Nanya’s revenue slipped 21 percent in July and another 18 percent in August—a dramatic fall of 38 percent as a whole compared to its May level of NT$3.4 billion (US$120 million). The calendar third quarter is also likely to be problematic for Nanya, the DRAM industry’s largest Taiwanese supplier and ranked fifth globally.
For its part, Micron during its earnings call pointed to a weak PC market as the primary reason for its DRAM revenue drop. In particular, weak PC sales depressed demand for the product, thereby hurting DRAM pricing. PCs historically have been the largest single demand driver for DRAM, but PC sales have fallen—hobbled by lingering concerns over the global economy, and overlooked by consumers in favor of more nimble devices like smartphones and tablets. Meanwhile, the new Ultrabooks—spearheaded by giant chip maker Intel Corp.—have not panned out on the market as initially hoped, delivering less-than-spectacular sales.
In light of generally lower forecasts to come for PC shipments, the DRAM market will have to endure yet a few more quarters of anemic results. PC shipments, however, are still expected to grow over the long term, which provides hope for DRAM producers that prospects will eventually improve.
Even so, future expectations may need to be tempered. While DRAM remains an absolutely critical component for electronics, the DRAM industry is built around the PC. And with PCs no longer enjoying the vaunted position they once held among consumers, the DRAM industry should adjust its manufacturing footprint to account for the shift. Not to do so would only result in a state of persistent DRAM oversupply that further damages the industry.
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