TrendForce Reports Falling Prices Caused Global DRAM Revenue to Drop 16.6% in First Quarter

DRAMeXchange, a division of TrendForce, reports that the global DRAM industry posted US$8.56 billion in revenue in this first quarter, down 16.6% from the previous quarter. Market oversupply and sliding average selling price were the main culprits behind the revenue decline. 

DRAMeXchange Research Director Avril Wu noted: “While there was some demand from smartphone inventory restocking in China, the first quarter was traditionally the slow period, and downward revisions on notebooks and iPhone shipment estimates further exacerbated the oversupply problem in the DRAM market.”

Samsung stayed on top of the revenue ranking while Micron struggled to remain profitable

In the first-quarter revenue ranking, Samsung securely held its position as the industry’s leader. Although Samsung’s revenue fell 16.6% quarterly to US$3.97 billion, its market share remained constant at 46.4%. Sliding prices significantly impacted SK Hynix’s revenue, resulting in a 19.2% quarterly decline to US$2.32 billion. SK Hynix retained second place in the revenue ranking with a market share of 27.1%. Micron also continued to fill the No. 3 spot with a market share of 18.5%.

Looking at suppliers’ first-quarter operating margins, Samsung and SK Hynix were respectively at 40% and 14%. Both South Korean memory makers suffered only a slight drop compared with the previous quarter. Micron on the other hand posted a negative operating margin of 1.2%, which was a sharp deterioration compared with 8.5% in the fourth quarter of 2015. The U.S.-based supplier is now in a tough fight to maintain its profitability.

Major DRAM suppliers continue to advance technologically as to protect their margins against falling prices

In terms of technology, Samsung continues to raise the percentage of 20nm production in its total output. The yield rate of Samsung’s 20nm process is also higher than its competitors’ advanced processes. Thus, Samsung currently has the lowest production cost among the top three suppliers. The South Korean memory maker plans to begin migrating to the 18nm technology in the middle of this year. By further improving the cost structures of mobile and PC DRAM products, Samsung will be able to remain profitable even as the prices keep falling.

SK Hynix began adopting the 21nm technology in the fourth quarter of 2015 and ramped up the production on this process in the first quarter of this year. However, all of SK Hynix’s 21nm products were still in the client testing phase, so their contribution to the first-quarter revenue was marginal.

Micron migrated to the 20nm technology in the fourth quarter last year and has completed the client testing for most PC and server DRAM products made on the advanced process. However, there is still room for improvement on the yield rate, so cost reduction is limited.

Nanya fared relatively well amongst the global DRAM makers, maintaining the same revenue level as in the last quarter with a gross margin of 32.7%. Nanya’s result was mainly attributed to an increase in the total output that came from the expansion of its 30nm-shrink  production.

Powerchip’s entire DRAM capacity reached 88,000 wafers per month in the first quarter, up by 4000 wafers compared with the fourth quarter of 2015. This small capacity increase also slightly boosted Powerchip’s revenue.

Winbond also had a small quarterly growth in revenue on account of the company’s long-term efforts to develop the automotive electronics market. Winbond is expected to finish R&D on its 38nm process in 2017. Manufacturing on the 38nm will push the Taiwanese memory maker forward in its technology migration after taking a long pause in recent years.