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Mobile DRAM enters low profit era

Posted: 07 May 2012 ?? ?Print Version ?Bookmark and Share

Keywords:mobile DRAM? memory market? LPDDR3? LPDDR2?

With the rising popularity of tablet PCs, DRAM makers are eagerly expanding mobile DRAM capacity, which not only improves profitability but also lowers risks from commodity DRAM productions. DRAMeXchange, a research division of TrendForce, forecasts smartphone shipments to reach at 148 million for Q2, a 48 percent YoY increase. As for hardware specifications, quad-core chips, Android 4.0 and LTE are in the spotlight this year, further increasing smartphone market share and mobile DRAM demand, the market research company said.

Looking at the supply side, Korean DRAM manufacturers have a strong foothold on the mobile DRAM market. Samsung and Hynix's combined revenue encompasses 70 percent of the mobile memory market, and the makers are expected to begin mass producing LPDDR3 in the second half of this year. The new product will be used not only in smartphones and tablet PCs, but ultrabooks as well. Although concerns over Elpida's bankruptcy protection filing have not yet dissipated, the Japanese maker is actively working on mobile DRAM production to increase turnover and market share. Elpida's LPDDR3 schedule is only slightly behind that of the Korean suppliers. As for Taiwanese makers, currently there is one supplier manufacturing LPDDR2 8Gb on the 3xnm processhopefully they will be able to grab a share of the market from the mobile memory leaders.

Taking a look at end demand, mobile phone makers like HTC, Nokia, Sony, Samsung, etc. are all introducing new flagship models this quarter. Additionally, demand for mid to entry level mobile phones is strong on the Chinese marketMTK has released its MT6575 series chip, while Qualcomm is targeting the mid to entry level market with its MSM7227A. Chinese mobile phone manufacturers are producing their own branded products to take a slice of the market, with no lack of wallet-friendly high-end models. TrendForce indicates, 4Gb to 8Gb is enough to meet memory requirements for Android 4.0 and Windows 8. In the next 6 to 9 months, even if smartphone content per box does not increase, because Q2 shipments were better than expected (an 8.8 percent QoQ increase), demand will show a rising trend.

As the commodity DRAM market continues to be in a state of oversupply, even if Elpida concerns have not yet been resolved, DRAM makers are gradually reallocating capacity to specialty DRAM products. As a result, DRAM contract price has risen to the current price of $20. However, in terms of cost structure, staying profitable remains a challenge. Turning to mobile DRAM is a logical option, but with so many makers jumping on the bandwagon, Q2 mobile DRAM contract price has fallen by 10-15 percent QoQ. Even if DRAM manufacturers continue to shrink process technology and increase yield rate to lower cost, mobile DRAM price and profitability will quickly approach that of commodity DRAMmobile memory is inevitably headed toward an era of low profitability.

LPDDR2 price

LPDDR2 8Gb price trend.
Source: DRAMeXchange, May 2012.

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