DRAM industry poised for steady growth in 2014, NAND flash key to major manufacturers’ success

TAIWAN: According to TrendForce, PC DRAM prices have shown noticeable signs of rebounding in 2013, following two years of financial losses and declining output value.

The prices of mainstream products like 4GB modules rose by nearly 60 percent, which helped to ease the declining ASP of both server and mobile DRAM. Even with the limited annual supply bit growth, there is a chance for total DRAM revenue to grow by at least 30 percent this year.

For NAND Flash, the market prospects look bright as mobile product sales experience further growth and as increasingly more and more structural transitions take place within the industry. As demand continues to grow at respectable rates and the ASP decline slows down, the 2013 industry value is expected to increase by an estimated 27.2 percent YoY (ending at approximately $25.7 billion). Demand bit growth, meanwhile, is expected to rise up to as high as 48.8 percent YoY.

DRAM industry revitalization to persist in 2014, Samsung expected to retain dominance
The aforementioned structural changes and transitions are expected to continue within the DRAM industry throughout 2013. Due to the supply-demand shifts and rising sales prices, the industry’s output values have taken a turn for the better and are slowly recovering. DRAM vendors, in responding to the rapid growth of cloud computing services and the popularity of mobile products, have begun to not only initiate various merging and restructuring processes, but are also intensifying the efforts to switch to the more profitable product lines.

As the diversification among the DRAM products grows, the differences in the profits experienced by manufacturers are expected to become more and more apparent. TrendForce has suggested that since DRAM vendors are unwilling to rely solely on making PC-based consumer products,

DRAM demand bit growth will decline on a gradual basis in the coming periods. Facing such a scenario, the manufacturers' attitude towards capital investments has become more conservative. Other than the migration process investments, there do not appear to be any plans to develop new manufacturing capacity.

In considering the technological limits reached by the manufacturing processes, it is predicted that the 2xnm process will become the mainstream in 2014. In the subsequent periods, profits will be determined by high-value added products such as LPDDR3 or DDR4 and the next generation stacking IC technologies (ie. 3D-IC, TSV).

Traditional products aimed at increasing supply bit growth will end up being of secondary importance. Given the increasing difficulties involved in advancing to the new manufacturing processes—and assuming that EUV (Extreme ultraviolet lithography) technology is not formally adopted— the DRAM industry’s steady growth can be reasonably expected to continue. The dramatic price fluctuations that traditionally characterized the DRAM market, all in all, can be said to have officially come to the end.

For 2014, TrendForce expects Samsung's dominance as a vertically integrated power and its 50 percent share of the DRAM market to remain unchanged. Other mobile DRAM makers will likely experience better operating margins as shipments of branded smartphones increase. Micron, following its merger with Elpida, will become more and more capable of competing against the No.2 ranked SK Hynix, whether it is in the area of capacity or product mix.

In addition to PC DRAM, mobile components such as eMCP (emmc multi-chip package) are expected to become more popular. How well NAND Flash technology is developed will become critical for the manufacturers when it comes to competing against the others within the industry.

2013 NAND flash output value grows by 27 percent due to rising demand and stable prices
In the NAND Flash industry, embedded product such as eMMC and SSD are showing respectable momentum thanks to the strong sales of smartphone, tablet, and Ultrabook; the various supply restraints that are being imposed by NAND Flash vendors, on the other hand, has helped to improve the market's supply and demand imbalance, in turn enabling NAND Flash prices to stabilize.

Given the existence of the aforementioned developments, and taking into account the growing demand and slowing ASP decline, 2013 NAND Flash market revenue grew by an estimated 27.2 percent compared to 2012 (arriving at approximately $25.7 billion). Assuming that the momentum continues, 2013 annual demand bit growth can be expected to reach up to 48.8 percent YoY.

On the demand side, TrendForce expects the total number of smartphones shipped to be around 935 million units in 2013, about a 38 percent YoY increase compared to the same period from a year ago. Due to what appears to be a growing interest in white box tablets and the increased diversity in the tablet product lineups, the number of tablet products shipped in 2013 will likely surpass the notebook market and arrive at approximately 200 million units.

With a growing number of improvements being made to the software and hardware features of smartphones, and with consumer expectations towards mobile media content increasing on a consistent basis, more and more mid-to-low end smartphones are expected to begin equipping the eMMC solution, a trend which is likely to help strengthen eMMC penetration.

TrendForce believes that the rapid development of eMMC will be highly critical when it comes to pushing the growth of the NAND Flash industry and strengthening the market's overall demand.

On the supply side, NAND Flash vendors are continuing to remain conservative towards CAPEX and wafer expansion plans. Because of this, bit output will be mainly derived by technology node migration. As the implementation of eMMC SSDs demands high product quality as well as reliability, the output portion of 20nm class products is projected to remain at above 70 percent throughout 2013.

Adoption of the newest manufacturing technology is not likely to occur until sometime during next year. Taking into account the fact that NAND Flash production will be mostly constrained, 2013 annual supply bit growth is forecasted be merely 41.5 percent YoY.