With revenue from dynamic random access memory (DRAM) modules improving in the fourth quarter last year via forces turned momentarily benign, third-party DRAM module suppliers obtained a brief respite from their relentless struggle in a marketplace where smartphones and tablets are favored over PCs, according to an IHS DRAM Dynamics brief from information and analytics provider IHS.
Combined revenue from the five main suppliers of DRAM modules amounted to $1.54 billion during the final quarter of 2012, the latest time for which full figures are available, up 10 percent from $1.40 billion in the third quarter. The growth toward solidly positive territory as last year came to a close was an unexpected welcome development following the disappointing 9 percent sequential downturn in the third quarter, when most trades register an uptick at normally the busiest time of year. The DRAM module industry had been struggling with unpredictable see-sawing revenue since the year began-alternately up and down for each quarter of the year.
Even with 2012 ending on a positive note, however, revenue for the final October to December period was lower than it had ever been compared to similar quarters in the past. Only two years ago in the fourth quarter of 2010, third-party DRAM module takings amounted to $2.40 billion-a difference of nearly a billion dollars-equating to a 55 percent contraction of the market in just two years.
DRAM module suppliers make packages containing DRAM chips. Some producers, like Samsung Electronics, manufacture DRAM modules that they earmark for their own computers or sell to other PC makers. DRAM module makers, on the other hand, are third-party entities that do not manufacture their own chips but still build modules using chips bought from the suppliers. The DRAM packages they make-usually of the white-box, unlabeled kind-are sold to entities like Dell, which then integrates the memory products into its PCs. But as PC sales have deteriorated, so has business for third-party DRAM module makers.
Falling PC sales take their toll
Last year was characterized by a continual write-down of PC shipment expectations, and it wasn't until the very end of the year that the supply-demand imbalance for commodity DRAM chips stabilized, leading to the positive revenue posted by the end of the fourth quarter. But in spite of falling tPC sales had been falling as computers lost out to smartphones and tablets, a decrease in the production of DRAM chips and modules brought relief to a beleaguered market.
Other factors helped turn the tide in DRAM's favor toward the final quarter last year. With DRAM chip makers migrating to the greener pastures of mobile DRAM, the commodity DRAM market gained benefit and rose in value. Volatility also eased on the commodity PC side, bringing about more steady supply and pricing.
Such movements helped lift pricing for DRAM chips and DRAM modules overall at the end of 2012, compensating for stagnating PC sales at the same time.
DRAM module players diversify their playbook-to little success
The five third-party DRAM module makers are Kingston Technology of California; Ramaxel Technology from China; Crucial Technology, a division of Micron Technology of Idaho; Smart Modular Technologies, also from California; and Adata Technology from Taiwan.
As the market for PC DRAM modules decline overall, module manufacturers are diversifying their product portfolios and moving into the specialty segments like the server market. The server effort is proving slower than expected, however, with specialty DRAM shipments contracting 13 percent in the fourth quarter, prompting makers to quickly shift back to the commodity DRAM space.
The post-PC era, and its implications for module makers
With PC shipments declining last year for the first time in 10 years and sales so far this year still anemic, DRAM module makers face continuing challenges in growing their business. A bright spot, however, could be the higher PC sales being forecast for the second half of 2013, combined with currently strong DRAM average selling prices.
If PC demand materializes as expected later this year, DRAM module makers can look forward to less depressing results for 2013, IHS believes. Still, it is difficult to imagine how the DRAM module market could ever rise again to the elevated levels it once enjoyed just three short years ago.