Paul Boughton
How bad is the downturn in the DRAM industry? So bad that even the dominant market leader, Samsung Electronics Co Ltd, is no longer immune, with the company in the fourth quarter of 2008 completely missing its shipment growth guidance, suffering a decline in market share and losing money for the first time in a year.
Global DRAM unit shipments achieved nearly zero growth in the fourth quarter compared to the third. Average Selling Prices (ASPs) declined by 38 per cent, far above the even historical annual average of 30 per cent. With shipments flat and prices dropping, global market revenue amounted to $4.2 billion in the fourth quarter, falling well short of iSuppli’s forecast of $5.8 billion.
For the entire year of 2008, revenue was $23.6 billion, coming in below iSuppli’s preliminary estimate of $25 billion.
The DRAM market has been mired in a downturn for nearly six months after a short recovery in the second quarter, with iSuppli in September 2008 downgrading its estimate of short-term conditions for suppliers to ‘Negative’, from ‘Neutral’ before, due to a severe oversupply, weak demand and sharp price declines.
The downturn is impacting the global DRAM business in an increasingly broad fashion. Five of the Top-10 suppliers suffered sequential declines in DRAM revenue in the third quarter, including Samsung. In the fourth quarter, all of the Top10 saw their revenue decline compared to the previous quarter.
“With its dominant market share, huge capital investments and industry-leading costs, Samsung generally has been able to outperform the overall DRAM industry — in both good times and bad,” said Nam Hyung Kim, chief analyst for iSuppli. “No wonder the company still holds the best DRAM profit margin in the industry. However, amid the recent global economic turmoil, Samsung now is no longer immune and its losses are expected to continue this quarter.”
At the same time, No 2 DRAM supplier Hynix increased its share to 20.8 per cent in the fourth quarter, up from 19.2 percent in the third quarter. Although Hynix suffered a 32.7 per cent decline in revenue in the fourth quarter, it managed to handily outperform the overall industry decline of 37.9 per cent.
No 4 DRAM supplier Micron was the star performer in the fourth quarter, with its revenue declining by only 16.4 percent—the smallest decrease among the Top 10 DRAM suppliers. The US company also posted the biggest market-share increase among significant DRAM makers in the fourth quarter, with its portion of industry revenue rising to 13.8 per cent, up from 10.2 per cent in the third quarter.
“Although Micron’s production output growth was about 20 per cent, the company’s shipment growth hit 36 percent sequentially, resulting in its relatively strong performance,” Kim said. “More importantly, Micron has reduced its market share gap with Japan’s Elpida, dwindling to 1.7 per centage points in the fourth quarter, down from 5.5 per centage points in the third quarter.”
No 3 supplier Elpida accounted for 15.5 per cent of DRAM revenue market share in the fourth quarter, down slightly from the third quarter. However, Elpida’s annual 2008 market share of 15.3 per cent compared to 12.2 per cent for the full year 2007, the biggest increase among the Top 10 suppliers on an annual basis.
As a group, Taiwan’s DRAM suppliers posted the industry’s worst performance, with the Top 3 suppliers — Nanya, ProMos and PowerChip — seeing their revenue decline by 50.2 per cent, 57.2 per cent and 74.5 per cent, respectively. The nation’s suppliers all cut wafer capacity to contain their cash losses. Taiwan’s suppliers have requested a government bailout, and potential action is pending.
Germany’s Qimonda, which filed for insolvency in January, saw its fourth-quarter revenue fall by 39.9 per cent compared to the third quarter. The company now is seeking investors during its insolvency phase.
DRAM suppliers have been selling their products at prices below their cash costs since the fourth quarter of 2007. This situation did not improve in the fourth quarter as dwindling demand further exacerbated the ASP decline. The industry’s operating profit margin fell to negative 65 per cent, and iSuppli believes the total operating losses reached $2.6 billion in the fourth quarter and $7 billion in 2008.
The industry’s fourth quarter operating loss of $2.6 billion exceeded the $2.1 billion operating loss for the full-year of 2007.
With disappointing fourth-quarter sales and radical supply cuts among manufacturers, iSuppli has reduced its 2009 DRAM revenue forecast down to $20 billion, down 15 per cent from 2008. Megabyte shipment growth for the year will amount to only 22 per cent, significantly down from 66 per cent in 2007. The DRAM per-megabyte ASP will drop by 31 per cent for the year.
For more information, visit www.isuppli.com
Global DRAM unit shipments achieved nearly zero growth in the fourth quarter compared to the third. Average Selling Prices (ASPs) declined by 38 per cent, far above the even historical annual average of 30 per cent. With shipments flat and prices dropping, global market revenue amounted to $4.2 billion in the fourth quarter, falling well short of iSuppli’s forecast of $5.8 billion.
For the entire year of 2008, revenue was $23.6 billion, coming in below iSuppli’s preliminary estimate of $25 billion.
The DRAM market has been mired in a downturn for nearly six months after a short recovery in the second quarter, with iSuppli in September 2008 downgrading its estimate of short-term conditions for suppliers to ‘Negative’, from ‘Neutral’ before, due to a severe oversupply, weak demand and sharp price declines.
The downturn is impacting the global DRAM business in an increasingly broad fashion. Five of the Top-10 suppliers suffered sequential declines in DRAM revenue in the third quarter, including Samsung. In the fourth quarter, all of the Top10 saw their revenue decline compared to the previous quarter.
“With its dominant market share, huge capital investments and industry-leading costs, Samsung generally has been able to outperform the overall DRAM industry — in both good times and bad,” said Nam Hyung Kim, chief analyst for iSuppli. “No wonder the company still holds the best DRAM profit margin in the industry. However, amid the recent global economic turmoil, Samsung now is no longer immune and its losses are expected to continue this quarter.”
At the same time, No 2 DRAM supplier Hynix increased its share to 20.8 per cent in the fourth quarter, up from 19.2 percent in the third quarter. Although Hynix suffered a 32.7 per cent decline in revenue in the fourth quarter, it managed to handily outperform the overall industry decline of 37.9 per cent.
No 4 DRAM supplier Micron was the star performer in the fourth quarter, with its revenue declining by only 16.4 percent—the smallest decrease among the Top 10 DRAM suppliers. The US company also posted the biggest market-share increase among significant DRAM makers in the fourth quarter, with its portion of industry revenue rising to 13.8 per cent, up from 10.2 per cent in the third quarter.
“Although Micron’s production output growth was about 20 per cent, the company’s shipment growth hit 36 percent sequentially, resulting in its relatively strong performance,” Kim said. “More importantly, Micron has reduced its market share gap with Japan’s Elpida, dwindling to 1.7 per centage points in the fourth quarter, down from 5.5 per centage points in the third quarter.”
No 3 supplier Elpida accounted for 15.5 per cent of DRAM revenue market share in the fourth quarter, down slightly from the third quarter. However, Elpida’s annual 2008 market share of 15.3 per cent compared to 12.2 per cent for the full year 2007, the biggest increase among the Top 10 suppliers on an annual basis.
As a group, Taiwan’s DRAM suppliers posted the industry’s worst performance, with the Top 3 suppliers — Nanya, ProMos and PowerChip — seeing their revenue decline by 50.2 per cent, 57.2 per cent and 74.5 per cent, respectively. The nation’s suppliers all cut wafer capacity to contain their cash losses. Taiwan’s suppliers have requested a government bailout, and potential action is pending.
Germany’s Qimonda, which filed for insolvency in January, saw its fourth-quarter revenue fall by 39.9 per cent compared to the third quarter. The company now is seeking investors during its insolvency phase.
DRAM suppliers have been selling their products at prices below their cash costs since the fourth quarter of 2007. This situation did not improve in the fourth quarter as dwindling demand further exacerbated the ASP decline. The industry’s operating profit margin fell to negative 65 per cent, and iSuppli believes the total operating losses reached $2.6 billion in the fourth quarter and $7 billion in 2008.
The industry’s fourth quarter operating loss of $2.6 billion exceeded the $2.1 billion operating loss for the full-year of 2007.
With disappointing fourth-quarter sales and radical supply cuts among manufacturers, iSuppli has reduced its 2009 DRAM revenue forecast down to $20 billion, down 15 per cent from 2008. Megabyte shipment growth for the year will amount to only 22 per cent, significantly down from 66 per cent in 2007. The DRAM per-megabyte ASP will drop by 31 per cent for the year.
For more information, visit www.isuppli.com