Great order news... As Bagley predicted, DRAM shortage
is likely in the 2nd half of the year. The industry is
in great shape for 2nd half and an early part of the next
year.
DRAM demand exhausting second quarter
supplies
By Jack Robertson
Electronic Buyers' News
(05/08/00, 09:10:48 AM EDT)
SAN JOSE -- The DRAM market pendulum is well into its long swing back to the point of tight
supply, as memory chip makers claim they are sold out of mainstay SDRAM chips -- and
warned that shortages will widen in the third quarter.
A poll of executives at Hitachi, Hyundai MicroElectronics, Micron Technology, and Samsung
said they can take no further SDRAM orders for the rest of the second quarter.
"We are sold out, and our customers are rushing to lock up SDRAM deliveries for the third
quarter when shortages are likely to be worse," said Farhad Tabrizi, vice president of
worldwide strategic marketing at Hyundai Electronics America in San Jose.
According to Semico Research Corp. in Phoenix, prices this month will rise 1% to 2% from
April, after falling as much as 5% since January. Sherry Garber, a Semico analyst, said the
increase speaks to a growing shortage looming in the second half of 2000, a year when
DRAM suppliers are expected to reap a 47.5% revenue increase, to $30.6 billion (see May 1
story).
"Depending on how steep the shortages are in the second half, revenues might even be
better for DRAM suppliers," Garber said.
Spot and OEM contract markets have inched up, although so far without the wild price
spikes of last fall. At the end of last week, American IC Exchange, Aliso Viejo, Calif.,
reported mainstream 8x8 64-Mbit SDRAMs had risen slightly from $6.35 to $6.65. Analysts
said OEM pricing for the same SDRAMs was about $6.25.
Older-generation 64-Mbit EDO memory chips were selling at a 3x premium over SDRAMs in
the spot market, at $16. As major DRAM makers drop EDO lines, the available supply has
become critical, causing the few remaining vendors making the part to raise their prices.
Dataquest Inc. in San Jose, agreed that a second-half supply/demand balance could swing
in favor of vendors, noting that except for a number of market aberrations, the price per
Mbyte of SDRAM has remained virtually stable since May 1999. But exactly when OEMs
must brace themselves most firmly for the impending shortage is a tough call, said
Dataquest analyst Jim Handy.
"We've been saying for a long time that in the second half, we were expecting to see a
supply/ demand balance, and it could happen earlier," Handy said. "What we're trying to
forecast is the intersection of two nearly parallel lines."
While the majority of OEMs are using SDRAM in their computing platforms and
communications equipment, those hoping to grab hold of emerging technologies such as
double-data-rate SDRAM and Direct Rambus DRAM may face even more of a wait than they
bargained for. The return to tight supply is expected to have a particularly hard impact on
the ramp of Direct RDRAM, as memory producers have grown reluctant to divert significant
output from suddenly lucrative SDRAM production.
Bob Eminian, vice president of marketing at Samsung Semiconductor Inc., San Jose, the only
major supplier of Direct RDRAM to computer OEMs, summed up the industry's dilemma:
"Since Rambus is made on the same production lines as SDRAM, any further shift to Direct
Rambus will only make the SDRAM shortage worse."
Bad as the SDRAM supply situation is getting for mainstream consumers, the shortage could
throw a wrench into the plans of Intel Corp. and Rambus Inc. to ramp Direct RDRAM
production sharply in the second half. Semico's Garber agreed that memory vendors are
loath to trade SDRAM production for Direct RDRAM, where initial yields are likely to be low.
Samsung estimated Direct RDRAM could constitute 20% of its total DRAM shipments this
year. Analysts noted that as the only vendor shipping Rambus in quantity to the computer
market, Samsung is enjoying high margins, which it wants to maintain. Indeed, Eminian said
Samsung has yet to substantially lower its Direct RDRAM RIMM module prices since it began
volume shipments last November.
Avo Kanadjian, vice president of marketing at Rambus in Mountain View, Calif., said Direct
RDRAM prices will come down sharply this fall as more suppliers ramp production. Module
manufacturer Kingston Technology Co. in Fountain Valley, Calif., cut its RIMM prices an
average of 35% last month, although the modules are still three to four times the price of a
comparably sized SDRAM module, according to Garber.
Other suppliers said it is not clear how much Rambus production they will ramp this fall.
"We'll deliver whatever our customers want," said Jeff Mailloux, DRAM marketing manager
at Micron Technology Inc. in Boise, Idaho. "Right now, we're talking with OEMs about their
DRAM requirements for the third quarter, and we're getting mixed signals on their demand
for Direct Rambus."
Ron Bechtold, vice president of Hitachi Semiconductor (America) Inc.'s DRAM division in
San Jose, said DDR chips could be cushioned from the same issues facing Rambus, given
that the interface is manufactured in much the same way as SDRAM. "We can wait very
late in the production cycle to determine whether the wafer will be used for
[single-data-rate] SDRAM or DDR -- much closer to actual market demand," Bechtold said.
Hitachi's quandary, ironically, is how much production capacity to allocate to trailing-edge
EDO DRAM in the face of mounting SDRAM shortages. Bechtold said that as one of the few
suppliers still making EDO, Hitachi is enjoying high margins on the older memory, which is still
being used by many OEMs.
"But you want to plan EDO production very carefully," he said. "You don't want the market
to suddenly disappear and be left with a lot of inventory you can't sell."
The third-quarter fate of Direct Rambus is being set now in a multitude of memory-supply
negotiations between vendors and OEMs. It takes memory makers three months from wafer
start to finished chip, which means producers are allocating their DRAM production now for
chips that will come to market in the third quarter.
Mailloux expressed a sentiment echoed by a number of other top-tier DRAM producers
considering how much of their precious capacity to allocate to Direct RDRAM. "Rambus isn't
going to enter the mainstream market until its large price differential over SDRAMs is
drastically reduced," he said. "Because the majority of PC OEMs want to buy the cheapest
memory possible, Rambus is going to have to cut the differential with SDRAM to nearly
zero." |
