ITotals - December `2002
Memory
The new year eve showed the prices hit their minimum mark for the previous two months while preserving the downward trend. Being surprised about that would be rather strange - this trend is natural and was predicted long before. The "back-to-school" and Christmas sales being over, the customary winter recession is back and will last until the Oriental (Chinese-Taiwanese) New Year, i.e. late January or early February. Therefore, the drop in demand as well as rise of supplies are evident - first 300 mm factories are being commissioned and most manufacturers are successfully completing migration to the 0.13 mk process technology. As these trends gather momentum, we can expect more pressure upon the prices from the top when the overproduction in 2003 becomes more and more perceptible.
On the other hand, this pressure might be smoothed out due to another factor: it's becoming more fashionable with manufacturers to gravitate towards OEM partnerships and fulfill guaranteed orders at guaranteed prices, so it's no surprise more and more chips manufactured by DRAM suppliers immediately leave for the OEM line bypassing the open market. And in some way the production growth might level off this process. So the most reasonable forecast will be the price reduction albeit not that sharp as could be expected. It's no doubt the prices will go down, to which the following fact points: as analysts say, putting into operation of all factories scheduled for 2003 alone should increase DRAM production volumes by 66%. This is despite the last year's DRAM production growth by merely 36.7% and not because the manufacturers could have increased production facilities. This market traditionally limits the demand, not the supply.
Meanwhile, already in December there appeared some preliminary annual totals. Samsung is definitely taking the lead, with Micron at the second a bit unstable position. Third comes Infineon headily soaring up to newer heights. Let's see how this Table of Ranks will change in the upshot: chances are the second and third places may reverse even though Infineon finally broke up with ProMOS, abandoned membership in that company and in January onwards will cease purchasing chips made by it. (They are already flooding the open market, cutting down the prices). Well, assume Infineon lost 10-15% of the total DRAM chip sales. But there is Nanya, whose first cornerstone into its joint factory was laid down on 2 December, there is also the Chinese SMIC which is shipping 0.14 mk memory modules to Infineon following the "chips in exchange for technologies" formula. There is also the guaranteed market - its 5-year-long $2.5 bln supplies agreement with Kingston.
As for ProMOS surpluses, there is a chance they might get directly into Elpida's hands - at least, negotiations on that are underway. We wish it the best of luck, although such volumes can't change the situation radically, judging by the goals it posed - during the year it has got to increase the production volumes by 6-10 times!
Good ambitious plans, aren't they? I wonder what goals Micron set for the previous quarter. At least the quarter was completed at -$316 mln with the $685 sales volume. It looks like a paradox - from the technical viewpoint the company is doing well after migrating around 40% of its production lines to the 0.13 mk process technology, but anyway for several quarters the company has been deep down. Traditionally, Hynix was appointed scapegoat, and Micron's quarterly report point-blankly accused it of damping. In some way, Micron is right and Hynix once again confirmed the accusation while receiving another ring-buoy in January in the form of $1.6 bln converted permanent debt of the company stock from creditors and another $2.5 bln issued for the technical re-equipment of production. So the decision of U.S. Ministry of Trade to introduce barrage dues against Hynix may affect it in a bad way.
It's a pleasure to see that the companies are fighting on the technological ground as well. In December, Hynix presented fastest DDR chips ever - the 128 MB chips offer 500 MHz clock speed, which is equivalent to the resultant 1000 MHz! In fact as powerful as DDR II, but about 10% cheaper and having the older wiring. Micron responded to that by presenting 0.11 mk 1GB DDR SDRAM chips, thus holding two records at a time - the 0.11 mk process suitable for commercial production plus the 1GB for DDR.
As for the finished products, the memory modules, an interesting thought is arising: the same situation as with motherboards is taking shape. Trying to increase sales volumes, manufacturers are coming up with new solutions trying to expose those small user groups who ignored them before. Among the good samples that hit the retail early in December in Japan are merely the 2GB register PC2100 modules built on Infineon 512 MB chips (that used to go to the OEM channel completely) and the second-generation OCZ "overclockers' modules" in which due to the better selection of DRAM chips and finer dressing of the PCB the company succeeded in reducing the CAS Latency down to two cycles in the "PC3500" and "PC3700" modules.
In fact, it's not a long way to go from PC3200 to PC3500, and JEDEC at its December session finally made up the decision to make the PC3200 standard, thus skillfully wagging to Intel who made a U-turn in its direction. We must admit though the decision made by JEDEC is simply a de jure confirmation of the currently established situation. A good example of that is Samsung who in November showed 10 mln PC2700 and PC3200 chips per month in the 128 MB equivalent. This is despite that Samsung's DDR share in the totally produced memory modules is much lower than that of Nanya. Now that Intel and JEDEC officially "recognized" PC3200 the way is cleared, so by the end of the year the PC3200 should take over almost 100% of the DDR modules market.
There is an option to further increase the bandwidth without any raise of clock speed - take for instance the notorious QBM by Kentron. Upon approval of the PC3200 the company suggested the option of QBM modules built on its base, the PC6400. That's great because it is an ideal fit for prospective FSB800 Pentiums, however, the cost of a QBM module appears to be around $15 as expensive than for the regular module of similar capacity. It's definitely not an option for the mass market, so the following scene is taking shape: among the chipset manufacturers who support QBM modules, are only VIA (and maybe SiS, theoretically), and among the modules manufacturers it is only PNY. The idea is good, but hardly viable.
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