The second quarter of 2014 saw the global DRAM industry value reach US$10.8 billion, an increase of 9% compared to the previous quarter, according to DRAMeXchange, the memory and storage research division of TrendForce.
This impressive growth in value as well as profitability is attributed to the effective product mix adjustments made by the DRAM manufacturers. Of the three major DRAM suppliers, Samsung had the most impressive 2Q14 performance with an operating margin of 39%, followed close behind by SK Hynix with a 38% operating margin. Inotera, a subsidiary of Micron, ended up with the industry’s largest operating margin at 54.6%.
The US based Micron, a key player with influence over the market’s pricing movements, ended up with approximately 26% of the market by the end of 2Q14. Given the DRAM industry's oligopoly structure and a continuously tightening supply, price drops cannot be expected. The DRAM industry value for 2014 is projected to grow by an estimated 36% YoY to US$46.8 billion.
Production Technology Analysis of DRAM Vendors
Samsung’s advances in production technologies resulted in its 25nm yield rate improving to 85% in the second quarter. Thanks to enhanced output growth and the continuously rising contract prices, Samsung’s 2Q14 revenues were able to grow by an estimated 20% compared to the last quarter. The Korean company's 2Q14 operating margins, meanwhile, benefited from lowered manufacturing costs, and reached 39%, the highest among leading DRAM manufacturers.
SK Hynix’s revenues for the entire second quarter were up by only 6% due to limited production yields. However, continued advancements in its 25nm wafer production technology may see its revenues and operating margin, which reached close to 38% in 2Q14, show further improvements in the coming periods.
Micron’s Singapore Tech plant officially made a transition towards NAND flash products during the second quarter of this year and took steps to reduce its total wafer output, with 2Q14 DRAM revenues slightly declining by 2%. Its operating margins ended up at approximately 25.5%, up slightly from the previous quarter thanks to its continuous efforts to transition towards 25nm technology. With development for its 25nm technology continuing and the testing and mass production phase for its 20nm process scheduled to begin in 4Q14 and 1H15, respectively, the US company could effectively shorten the technological gap with its Korean competitors as early as 2015.
Taiwanese company Inotera’s performance was the most noteworthy among all DRAM manufacturers thanks to its effective pricing structure and attention to profitable product lines. Not only did their operating margins reach 55% by the end of the second quarter, but their leading position with the 20nm manufacturing process also puts the company ahead of their Taiwanese competitors.
Nanya is currently focusing on producing speciality DRAM as well as working with special module plants on the production of its PC DRAM components. In the second quarter of this year, the company's performance turned out to be relatively stable, with revenues rising by an estimated 2.5% QoQ and operating margins reaching 36%.
Winbond continues to improve sales of its speciality DRAM and small density Mobile DRAM components, experiencing an impressive 10.5% QoQ growth in its overall revenues. The company plans to continue to develop its 46nm manufacturing process. By lowering its manufacturing cost, the company’s 2Q14 operating margins rose to approximately 9.3%.
Powerchip's 2Q14 DRAM revenues rose by approximately 20% from the previous quarter thanks to the growth of the company's foundry business as well as its raised PC DRAM output. As its P3 plant currently still has room for growth, the company is likely to consider a major expansion for its existing wafer production capacity.