As the standard DRAM market experiences an unprecedented cycle of supply-demand imbalance, the shortage of DDR3 production capacity has become even more severe.

According to a report from the Economic Daily News, with leading manufacturers like Samsung exiting DDR3 production, while demand for DDR3 from AI and edge computing devices continuing to increase, the storage capacity per single device is rising sharply. This is expected to drive a rebound in DDR3 prices, potentially benefiting related Taiwanese manufacturers such as Winbond, Elite Semiconductor Microelectronics Technology (ESMT), and Etron.

In response to the shift of operational focus to high-bandwidth memory (HBM) and DDR5, the world’s top three memory manufacturers are gradually phasing out the DDR3 market.

Reportedly, Samsung has informed customers that it will cease DDR3 production by the end of the second quarter. SK Hynix had already converted its DDR3 production at its Wuxi plant in China to DDR4 by the end of last year. Meanwhile, Micron has significantly reduced its DDR3 supply to expand its DDR5 and HBM production capacity.

As per industry sources cited in the same report, it’s said that as the reduction in production by major DRAM manufacturers continues to take effect, it has driven standard DRAM prices up from the second half of 2023 to the present, with further increases expected.

Thus, prices for niche memory like DDR3 tend to lag behind standard DRAM by one to two quarters. For Taiwanese manufacturers such as Winbond, ESMT, and Etron, which focus on DDR3, the benefits of DDR3 price increases will gradually become apparent this quarter and next.

The industry sources cited by the same report also point out that DDR3 applications remain quite widespread. For example, WiFi 6 devices predominantly uses DDR3, and the next generation, WiFi 7 devices, will still primarily use DDR3/DDR4. Additionally, edge computing devices would continue to adopt DDR3. With supply significantly decreasing while demand remaining strong, DDR3 prices are expected to continue their upward trend.

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(Photo credit: Samsung)

DRAM giant Nanya Technology held its shareholder meeting earlier today, during which Chairman Chia-Chau Wu reported on the company’s operations. According to a report from UDN, He mentioned that despite challenges such as unfavorable market conditions, geopolitical tensions, and the US-China trade conflict, Nanya Technology experienced a transition from profit to loss last year.

Nevertheless, the company continues to possess strong technological capabilities. This year, Nanya plans to introduce more products using the 10nm 1B process. Additionally, the 10nm 1C process is set to complete its first product design by the end of this year and begin trial production early next year. In 2026, Nanya will introduce new facilities, and by integrating miniaturization and Through-Silicon Via (TSV) processes, it will enter the high-capacity DRAM module market to meet the demand from the server market.

Wu emphasized that the 1B process products are Nanya Technology’s key expansion focus this year. In addition to promoting 8Gb/4Gb DDR4 to the personal computer and bare die application markets, the 16Gb DDR5 will initially target mainstream markets, including personal computers and servers.

Wu further highlighted that Nanya Technology continues to invest in research and development during the industry’s adjustment period to strengthen its future competitiveness.

Currently, in addition to developing three products under the second-generation 10nm (1B) process, Nanya Technology is also developing four other products: 16Gb DDR5 and miniaturized versions, 16Gb LPDDR4, 16Gb LPDDR5, and 4Gb DDR3, which will also gradually enter trial production.

He added that this year, Nanya Technology will simultaneously develop Through-Silicon Via (TSV) process technology. In the future, by combining the miniaturized DDR5 with the TSV process, Nanya aims to produce high-capacity DRAM modules to meet the demand of the server market.

Furthermore, the third-generation 10nm (1C) process technology is on track, with the design of the first 16Gb DDR5 product expected to be completed by the end of the year and trial production beginning early next year.

To support the transition to the 1B process and the construction of new facilities, Nanya Technology’s capital expenditure for this year is approximately TWD 26 billion (roughly USD 805.2 million), with less than half of the budget allocated to production equipment.

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(Photo credit: Nanya Technology)

According to Economic Daily News’ report, the DDR3 market is experiencing a surge in prices, with an almost 10% short-term increase. Contract prices for this quarter are expected to rise by 10% to 15%, with a continued optimistic outlook for the first quarter of next year.

Market analysts point out that global leaders like Samsung, SK Hynix, and Micron currently dominate standard DRAM and NAND Flash. Taiwan-based companies are unable to compete with them in chip production, except for module companies which have the potential to capitalize on the rebound of the DRAM and NAND market due to their advantage of low-cost inventory.

On the other hand, DDR3 production remains primarily under Taiwan’s purview, and the price surge is significant, providing substantial assistance to Taiwanese memory industry players.

Industry sources indicate that the main impetus behind the current memory market upswing stems from the continual reduction in production by major international manufacturers. With tightening capacities, they are strictly controlling shipments, displaying their determination to support the price increases.

Besides, companies like Samsung, SK Hynix, and Micron are actively venturing into AI applications, shifting their main capacity to produce high-bandwidth memory, DDR5, and other advanced areas. This shift has created room in the DDR3 market. Recent replenishment of inventories on the client end, along with a surge in orders for consumer electronics, has been witnessed.

TrendForce indicated that DDR3 prices have been steadily rising since September. The cumulative increase for DDR3 4Gb has reached nearly 10%, while DDR3 2Gb has shown a cumulative rise of 14%; regarding contract prices, TrendForce expects a robust increase of 10% to 15% for this quarter, with a continued strength forecasted for the first quarter of next year, likely to rise another 5% to 10%.

DDR3-related companies are optimistic about market developments. Etron believes that with inventory digestion coming to an end, “the cyclical bottom is over,” and they are gradually heading towards the dawn of recovery. They hold a positive outlook for significant growth in the global DRAM market next year.

ESMT, on the other hand, continues to advance the progress of their in-house products. They are continuously developing new products in DRAM, Flash, and MCP, expanding into different markets. This includes accelerating the development of 19-nanometer DRAM, achieving mass production of 28-nanometer NAND Flash, and researching niche memory products for automotive applications.

Winbond’s General Manager, Pei-Ming Chen, points out that their operations for this quarter will be better than the third quarter and they have a positive view of the DRAM market for next year.

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• Q4 Mobile DRAM and NAND Flash Contract Prices Forecast to Rise, Upward Trend May Continue into 1Q24, Says TrendForce

(Photo credit: Unsplash)

According to TrendForce forecasts, average overall DRAM pricing in 2Q22 will drop by approximately 0~5%, due to marginally higher buyer and seller inventories coupled with the demand for products such as PCs, laptops, and smartphones being influenced in the short-term by the Russian-Ukrainian war and high inflation weakening consumer purchasing power. At present, the only remaining source of demand is on the server-side, so overall DRAM stocks will remain oversupplied in 2Q22.

In terms of PC DRAM, PC OEMs are adopting a conservative stocking strategy for orders in 2Q22 due to the Russian-Ukrainian war, which may continue affecting orders during peak season in 2H22, and revising 2022 shipment targets downwards. Additionally, the overall supply of bits is still growing, so the PC DRAM price slump in 2Q22 will further expand to 3~8% and may continue to deteriorate.

In terms of server DRAM, the current server DRAM inventory level held by cloud service providers and enterprise clients is roughly the same as the amount held in 1Q22, and this relatively high inventory level is not enough to support a price reversal. The supply rate of server DRAM, of which there is still an oversupply, remains higher than 100% and this situation will continue into 2Q22. However, a price decline in 2Q22 is expected to converge at 0~5%, coinciding with the peak seasonal stocking surge.

In terms of Mobile DRAM, due to a number of factors such as high inflation, changes in the pandemic situation in various countries, and the Russian-Ukrainian war, it cannot be ruled out that the production volume of smartphones may continue to decline while smartphone brands will surely be more careful when planning production and material preparation. On the supply side, technology migration in manufacturing has offset the shift of DRAM production to the server DRAM field beginning in 2H21, maintaining the level of the mobile DRAM bit supply. For this reason, since the production targets of smartphone brands have fallen and the average memory capacity of a single device has not significantly improved, oversupply is forecast to continue in 2Q22, with pricing set to decline approximately 0~5%.

In terms of Graphics DRAM, the demand side has been affected by weak virtual currency prices in recent months which has gradually started to assuage demand for graphics cards. The supply side is facing supply constraints and a vendor shortage since Micron will withdraw from the GDDR6 8Gb supply in 2Q22. This will cause a temporary supply-demand imbalance for Graphics DRAM as the capacity allocation of Korean manufacturers fail to immediately fill the above-mentioned shortfall. Even if terminal demand slows down, considering GDDR6 8Gb remains mainstream in the current market, it will take time for manufacturers to convert specifications to 16Gb. Pricing is forecast to increase by 0~5% in 2Q22.

In terms of consumer DRAM, demand for DDR3 from specific products such as WiFi 6 and 5G base stations remains robust. The quantity of DRAM supplied to the market varies from manufacturer to manufacturer. Samsung and SK Hynix have gradually reduced production of DDR3, while Taiwanese firm Nanya Tech has recently shifted production to DDR3, owing to DDR3’s higher gross profit margin. Due to relatively stable demand and limited shipments from Korean manufacturers, the price of DDR3 will increase by 3~8% in 2Q22 with DDR4 maintaining a downward price trend.