Contracts for DRAM orders through the first quarter of next year are almost fully booked, officials from semiconductor makers Samsung Electronics and SK Hynix have said.
Semiconductor makers are apparently satisfied with the state of the global DRAM market, which entered a boom cycle in the second half of this year.
DRAM prices have been trending upwards since June and are predicted to increase another 30 percent in the fourth quarter of the year. The situation is attributable to the fact that the demand for DRAMs in PCs and smartphones is outstripping supply due to declining investments and a delay in the scaling up of production processes, analysts agree.
The Taiwanese semiconductor price information firm DRAM Exchange released a report on Oct. 5, saying that fixed DRAM prices are forecast to surge about 30 percent in the fourth quarter of the year due to rising demand for notebooks.
The report said fixed DRAM prices based on DDR3 4Gb, 512Mx8 and 1333/1600MHz rose 8.7 percent last month. The rising trend is expected to get steeper in the upcoming quarter, it estimates.
DRAM prices declined in the first half of the year. Prices for 4Gb DRAM chips dropped from $1.72 apiece late last year to $1.5 in late June of this year.
Things have changed since then. First of all, demand for notebooks is rising faster than forecast. Intel, citing rising demand for notebooks, revised its 3rd quarter sale projection from $14.9 billion to $15.6 billion. New notebook buyers have been on the rise, even after the free upgrade of Microsoft’s Window 10 ended in late July. The popularity of the video game “Overwatch” has pushed up a demand for gaming PCs, business sources said.
Indeed, the short-term future for DRAMs chips looks bright. Micron, announcing its 3rd quarter business performances on Oct. 4, said demand in the DRAM market is improving. The U.S. company has forecast that it will post between $245 million and $330 million in operating profit in the next quarter. It posted a $27 million loss in the 2nd quarter.
In particular, demand for DRAMS for smartphones is rising. Apple has adopted the 3GB DRAM for iPhone 7, an increase in capacity from its predecessor, iPhone 6, which was outfitted with 2GB DRAMs.
But the supply for DRAMS is not meeting demand. Only two DRAM lines were built since 2010. They are the first phase of Samsung Electronics’ 17th line and SK Hynix’s M14 Line. DRAM supply is different from the NAND flesh memory sector, in which new lines have been added. In the first half of 2015, Samsung Electronics changed part of the 15th line for producing DRAMs to a NAND line.
SK Hynix and Micron, two of the industry’s Big Three companies, suffered a setback in scaling the 20-nanometer technology, which have remained flat in production. Each chipmaker has succeeded in increasing production by about 30 percent yearly, but the two companies have met a stumbling block when it comes to the 20-nanometer technology.
Samsung Electronics began to mass-produce DRAMS using the 18-nanometer technology in April. Micron failed to mass-produce DRAMs via the early 20-nanometer technology, which led to a loss in 2nd quarter operating profit. SK Hynix is expected to log 700 billion won in operating profit in the fourth quarter by expanding the 21-nanometer technology process.
Business sources said the DRAM sector cannot proceed beyond the 18-nanometer technology. Further scaling means costs will have to rise, because the process is required for the expensive ultraviolet (EUV) exposure apparatus. Even if scaling edges up one step forward, it cannot match cost increases, leading to lower productivity.
That is the reason chipmakers are unwilling to make investments. DRAM makers favor maintaining the current oligopoly regime, citing a low growth rate, which is seen as a barrier to makingo investments. “That essentially limits the DRAM supply,” said Do Hyun-woo, a researcher at Mirae Asset Daewoo.
