TAIPEI – Global DRAM revenue reached $17.7 billion in the fourth quarter, up 1.1% year-over-year, according to TrendForce.
This growth largely can be attributed to Chinese smartphone brands – including Oppo, Vivo, and Xiaomi – expanding procurement activities for components to seize the market shares made available after Huawei was added to the Entity List by the US Department of Commerce, says the research firm.
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 Micron, remained somewhat unchanged during the period compared to the third quarter. Micron experienced a significant sequential decline.
Demand for PC, mobile, graphics, and consumer DRAM remains stable throughout first quarter. 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. These aforementioned factors, in addition to Micron’s power outage at the start of December, resulted in a price hike across all DRAM product categories in the first quarter.
TrendForce expects DRAM bit supply to remain unchanged and prices to enter an upturn compared with the previous quarter. However, 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 sequential increase in global DRAM revenue compared to the fourth quarter.
With regard to revenue, the performances of Korean DRAM suppliers and that of Micron once again diverged from each other in the fourth quarter. This difference can mostly be attributed to the fact that Micron had 13 work weeks during the period compared to the prior quarter, which contained 14 work weeks and therefore was a higher base for sequential comparison. As such, Micron DRAM bit shipment and ASP both fell short.
Conversely, although Korean suppliers likewise experienced a sequential decline in DRAM ASP, they were able to increase their bit shipment, indicating 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 the fourth quarter, Samsung and SK Hynix recorded a 3.1% and 5.6% sequential increase in revenue, respectively, while Micron’s revenue declined 7.2% due to the corresponding decline in its quarterly bit shipment.
Micron’s market share also subsequently fell to 23%. Moving into the first quarter, however, Micron is likely to catch up to its Korean competitors, owing to Micron’s pricing strategies, which are the most aggressive among DRAM suppliers, as well as to a general upturn in DRAM quotes, says TrendForce.
With regard to profits, all suppliers experienced a decline in the fourth quarter as a result of the 5-10% sequential decline in DRAM ASP. In particular, Samsung’s operating profit margin fell from 41% in the third quarter to 36% in the fourth quarter, while SK Hynix likewise showed a decline from 29% in the third quarter to 26% in the fourth quarter. For the September-November fiscal quarter (Micron’s fiscal first quarter), 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 the prior quarter to 21% in the fourth quarter.
As a whole, DRAM suppliers were unable to make up for the drop in DRAM quotes with cost-optimization measures. In the first quarter, 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.
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 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 regard to Taiwanese suppliers, Nanya Tech increased its bit shipment, while its quotes fell compared to the third quarter, resulting in a sequential decline of 0.7% in revenue in the fourth quarter. Along with falling quotes, Nanya Tech’s operating profit margins narrowed from 13.5% to 8.8%. As for Winbond, NOR Flash products accounted for an increasing percentage of its total revenue, mostly at the expense of its NAND Flash business. However, its DRAM revenue underwent sequential growth of 0.8% 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 about 1.7% sequentially in the fourth quarter because its production capacity for DRAM was crowded out by other logic ICs in relatively high demand, including PMICs, driver ICs, and CIS.
TrendForce indicates, 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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