Global DRAM revenue reached US$17.65 billion, a 1.1% increase YoY, in 4Q20, according to TrendForce’s latest investigations. For the most part, this growth took place because Chinese smartphone brands, including Oppo, Vivo, and Xiaomi, expanded their procurement activities for components in order to seize the market shares made available after Huawei was added to the Entity List by the U.S. Department of Commerce. These procurement activities in turn provided upward momentum for DRAM suppliers’ bit shipment. However, clients in the server segment were still in the middle of inventory adjustments during this period, thereby placing downward pressure on DRAM prices. As a result, revenues of most DRAM suppliers, except for Micron, remained somewhat unchanged in 4Q20 compared to 3Q20. Micron underwent a noticeable QoQ decline in 4Q20 (which Micron counts as its fiscal 1Q21), since Micron had fewer work weeks during this period compared to the previous quarter.
Demand for PC, mobile, graphics, and consumer DRAM remains stable throughout 1Q21. As for clients in the server segment, they have now reinitiated a new round of procurement for server DRAM after adjusting their inventories during the two previous quarters (3Q20 and 4Q20). These aforementioned factors, in addition to Micron’s power outage at the start of December last year, resulted in a price hike across all DRAM product categories in 1Q21. TrendForce expects DRAM bit supply to remain unchanged and prices to enter an upturn compared with 4Q20. However, as 1Q21 is the first quarter of the upturn in the DRAM market, and demand is yet to emerge out of the off-season, any growth in bit shipment and prices is expected to be modest, with only a slight QoQ increase in global DRAM revenue compared to 4Q20.
Suppliers’ profits were constrained by persistent declines in DRAM prices in 4Q20
With regards to revenue, the performances of Korean DRAM suppliers and that of Micron once again diverged from each other in 4Q20. This difference can mostly be attributed to the fact that, as previously mentioned, Micron had 13 work weeks in 4Q20 (which it refers to as its fiscal 1Q21) compared to the previous quarter, which contained 14 work weeks and therefore was a higher base for QoQ comparison. As such, Micron’s 4Q20 DRAM bit shipment and ASP both fell short of 3Q20 figures. Conversely, although Korean suppliers likewise experienced a QoQ decline in DRAM ASP, they were able to increase their bit shipment, indicating that their client demand was recovering during this period. Samsung and SK Hynix both increased their bit shipment by a wider margin than previously expected. This was enough to offset the downward pressure on revenue caused by the decline in the two companies’ DRAM quotes. In 4Q20, Samsung and SK Hynix each recorded a 3.1% and 5.6% QoQ increase in revenue, while Micron’s revenue declined by 7.2% due to the corresponding decline in its quarterly bit shipment. Micron’s market share also subsequently fell to 23% in 4Q20. Moving to 1Q21, however, Micron is likely to catch up to its Korean competitors in terms of market share, owing to Micron’s pricing strategies, which are the most aggressive among DRAM suppliers, as well as to a general upturn in DRAM quotes.
With regards to profits, all suppliers experienced a decline in 4Q20 as a result of the 5-10% QoQ decline in DRAM ASP. In particular, Samsung’s operating profit margin fell from 41% in 3Q20 to 36% in 4Q20, while SK Hynix likewise showed a decline from 29% in 3Q20 to 26% in 4Q20. For the September-November fiscal quarter (Micron’s own fiscal 1Q21), Micron posted a similar decline in DRAM ASP compared to that of its Korean competitors, as well as a decline in operating profit margin from 25% in 3Q20 to 21% in 4Q20. Taken as a whole, DRAM suppliers were unable to make up for the drop in DRAM quotes with cost-optimization measures. Looking ahead to 1Q21, on the other hand, TrendForce expects DRAM quotes to rebound from rock bottom, in turn generating some upward momentum for suppliers’ profitability to rebound from rock bottom as well. These events will officially mark the cyclical upturn in DRAM prices. It should also be pointed out that, for instance, leading supplier Samsung still retains at least a 30% profit margin even at the lowest level of quotes, while this figure is closer to 10% for Nanya Tech, which is comparatively smaller in scale as a company. These margins suggest that the DRAM industry will be able to maintain its profitability due to its oligopolistic nature, at least prior to the entrance of emergent suppliers from China.
With regards to Taiwanese suppliers, Nanya Tech also increased its bit shipment while its quotes fell compared to 3Q20, resulting in a slight QoQ decline of 0.7% in revenue in 4Q20. Along with falling quotes, Nanya Tech’s operating profit margins narrowed from 13.5% in 3Q20 to 8.8% in 4Q20. As for Winbond, NOR Flash products accounted for an increasing percentage of its total revenue, mostly at the expense of its NAND Flash business, in 4Q20. However, its DRAM revenue underwent a slight QoQ growth of 0.8% during this period due to an early upturn of the specialty DRAM market. This growth was relatively limited due to Winbond's limited DRAM bit supply rather than low client demand. PSMC’s DRAM revenue includes only its in-house PC DRAM products. The company’s DRAM revenue declined by about 1.7% QoQ in 4Q20 because its production capacity for DRAM was crowded out by other logic ICs in relatively high demand, including PMICs (power management IC), driver ICs, and CIS.
TrendForce indicates that, going forward, the three Taiwanese suppliers are still placing a heavy emphasis on their strongest products while furthering their own respective competitive advantages in the industry. For instance, Nanya Tech has been actively developing its 1A/1Bnm process technologies, with the goal of submitting samples to its partners by the end of 2021. Winbond, on the other hand, is continuing to improve the yield rate of its new 25nm DRAM process technology and expand its production capacity to meet the high demand for NOR Flash memories. Finally, PSMC will continue to maintain fully loaded wafer capacity for logic ICs, which are products with relatively higher gross margins, given the high demand for such products at the moment.
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