DRAM manufacturers must transition process nodes downward warns IHS

The technologies are already employed by leading memory suppliers such as Samsung Electronics at a time when prices in the dynamic random access memory industry are diving to low levels. According to IHS, Samsung's wafer production in the third quarter at the 3x/2xnm level is the most ef?cient currently available to manufacturers, standing at 29%. This, says the firm, is by far the highest level among all major dram specialists. Mike Howard, analyst at IHS, believes with dram prices in the Q3 declining to $1.60, down from more than $6.50 a year ago, manufacturers not running on a 3xnm process node could take a loss on sales of 2gigabit DDR3; the main dram con?guration. "Samsung will maintain its industry lead by moving nearly 80% of wafers to 3xnm or beyond by the end of 2012, with Hynix looking to keep pace but at one quarter behind," said Howard. "Elpida promises to move quickly as well, even though its 25nm product is still in the early phases of quali?cation. The current laggards, Micron and Nanya, will be playing catch up through the end of next year. For their major products, both companies now rely on a still viable 42nm process that is probably cost effective only for this year, and the two then will need to accelerate their transition to 3xnm in order to stay competitive." According to Howard, for the rest of the industry still manufacturing at 4x/5xnm processes, production at those nodes means a decreasing likelihood of even covering cash costs, given today's low dram selling prices. "The cash cost per packaged 2Gb DDR3 die at 31nm currently stands at $0.68, but the cash cost balloons to $1.34 at 48nm," he noted. "With average selling prices for dram projected to slide even further, down to $1.25 in the fourth quarter, continuing to produce at the 4xnm node is tantamount to courting disaster. The path, then, is clear: manufacturers must move quickly and transition process nodes downward if they hope to stay ahead of continually plunging prices. Unfortunately, even such a ?x will present an unwanted side effect. As industry players struggle to keep up in the downward migration race, more dram per wafer will end up getting produced, depressing prices even further." Howard warns that the alternatives to playing catch up are few. "One tactic, adopted by Micron, involves diversifying the customer base to mitigate some of the pricing risk. But then, not everyone can pursue such a strategy or has access to varied markets. And as margins continue to evaporate for lagging players, such companies could end up being acquired - or worse, lose their business."