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Taiwanese Suffer Greatly Diluted Presence in Global DRAM Market

05 February 2013

The loss or reallocation of Taiwanese-branded dynamic random access memory (DRAM) wafer capacity will cause a shift this year in the global DRAM market, diluting the Taiwanese stamp but boosting the potential production capacity of other players like U.S.-based Micron Technology, according to an IHS iSuppli DRAM Dynamics brief from information and analytics provider IHS.

Taiwanese-branded DRAM capacity will amount to just 135,000 wafers per month (WPM) when the final quarter rolls around at the end of this year. Nanya Technology will account for about 60,000 WPM, with the rest divvied up among smaller Taiwanese producers such as Winbond Electronics and ProMOS.

In comparison, branded capacity from Taiwanese DRAM suppliers during the fourth quarter of 2012 amounted to 273,000 WPM. At that time Inotera Memories-a joint venture between Micron and Nanya-was supplying Nanya, while Powerchip Technology and ProMOS Technologies-two other Taiwanese producers-were also boosting the country's wafer capacity for the worldwide DRAM market.

This year, however, capacity from Inotera and another entity, Rexchip, will be absorbed by Micron, the new owner of those resources. Meanwhile, output by Powerchip and ProMOS is expected to be considerably lower.

All told, the Taiwanese at the close of 2013 will account for only a small portion of global DRAM capacity, dominated instead by the combined heft of South Koreans Samsung Electronics and SK Hynix.

U.S.-based Micron Technologies could shoot past Samsung after it absorbs capacity from the waylaid Taiwanese, and also if it includes wafer capacity from acquired entities in addition to its own native potential. But Micron's actual output-distinct from capacity-could be much less than that of Samsung, given the integration hurdles that the Idaho-based manufacturer will have to overcome, as well as the rebalancing it may do between DRAM and NAND flash memory.

Taiwan's fade from the scene

Unlike 10 years ago when the country appeared to be a viable contender, Taiwan is no longer in a position to challenge South Korea for supremacy in branded DRAM capacity. And while Taiwan will remain a key low-cost DRAM manufacturer as well as a provider of specialty DRAM, the likelihood of the country's wafer capacity enlarging much beyond its current scope is very slim, IHS iSuppli believes.

The drop in Taiwan's branded DRAM wafer capacity will come on the heels of two significant developments.

On one front, 65,000 wafers will be moved from Nanya's column to Micron, after four years in which both companies had been responsible for their joint-venture effort in Inotera. That arrangement is now over, and all 130,000 wafers per month representing Inotera's entire capacity have now been allocated to Micron.

In a second change that mirrored the first, wafers amounting to 80,000 per month also will be taken away from Elpida Memory, a now-bankrupt Japanese producer, and moved to Micron. The wafers are being manufactured by Rexchip, a joint venture between Elpida and Taiwan producer Powerchip. Micron agreed to buy Powerchip's stake in Rexchip, after the U.S. DRAM manufacturer acquired Elpida last year.

These developments will benefit Micron enormously. If the newly acquired wafer capacities from Inotera and Rexchip are counted, and if capacity from Elpida as well as Micron's own were also included, Micron's total DRAM capacity in the fourth quarter of 2013 could go as high 418,000 WPM. Theoretically, that accumulated total capacity would vault Micron ahead of perennial DRAM runner-up SK Hynix, and even past longstanding champion Samsung.

The reality, however, is likely to be somewhat different. While Micron clearly will be much bigger, it is unlikely to surpass Samsung in actual DRAM production output. Instead, Micron will probably settle into the No. 2 spot in DRAM market share-which is based on actual output, not capacity, of the players. The headaches of integrating Elpida will likely stand in Micron's way, as will the strong probability that Micron will transition some of its memory capacity into producing the more lucrative NAND flash memory for smartphones and tablets, reducing its total DRAM output in the process.

Powerchip future is uncertain

Notwithstanding Taiwan's diluted wafer capacity, the country is likely to remain an important element in the global DRAM picture, especially because it remains a key location for DRAM manufacturing.

The future of Powerchip, however, remains uncertain. Currently one of Taiwan's largest memory foundries and a key supplier for many of that country's fabless memory design houses, cash-strapped Powerchip is exploring opportunities to sell the fab in order to improve its balance sheet. Likely buyers could be either one or a group of current customers that hopes to ensure a continuing viable supply of memory wafers, but Powerchip is unlikely to sell at less than $300 million-what the buyers appear to be offering at present.

A probable outcome is that Powerchip will retain primary control of its fab, and then sell or lease portions of the facility to specific customers. In so doing, Powerchip can raise capital-while its customers will be able to secure the wafers they need.

Read More >> DRAM Focus Swings Back to Taiwan



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