DRAM Bulletin: Consolidation won't raise prices
By Nam Hyung Kim
Semiconductor Business News
(02/21/03 10:27 a.m. EST)
siliconstrategies.com
The following column was provided by Nam Hyung Kim, a senior analyst with iSuppli Corp., an El Segundo, Calif.-based market research firm.
If anybody thinks consolidation will solve the DRAM industry's present overcapacity situation and lead to more stable pricing, think again; the market has been undergoing constant consolidation for more than a decade, and there's little evidence it can mitigate the impact of the present manufacturing capacity glut.
Evidence of this constant process of consolidation can be found in the historical market share rankings of top DRAM suppliers. Over the period from 1995 to 2002, the competitive landscape of the DRAM industry has changed dramatically. Out of the top 10 stand-alone commodity DRAM suppliers in 1990 and 1995, only two companies -- Samsung Electronics and Micron Technology Inc. -- remained on the list in 2002.
Gone from the 2002 top ten list compared to 1992 and 1995 are Fujitsu, Texas Instruments, Motorola, Siemens, Hitachi, Hyundai, LG Semicon and Oki.
Fujitsu Ltd. is no longer producing commodity DRAM. The DRAM operations of NEC Corp. and Hitachi were consolidated into Elpida. The commodity DRAM businesses of Texas Instruments Inc., Motorola Inc. and Toshiba Corp. were all acquired by Micron.
The semiconductor division of Siemens AG was spun off to form Infineon Technologies AG while Hyundai and LG Semicon were consolidated into one company; Hynix Semiconductor Inc.
And consolidation will continue because Mitsubishi Electric Corp. has announced it will sell its DRAM operation to Elpida Memory Inc. in 2003.
Looking further at the evolution of the top ten rankings, the concentration of market share among the top-ranked players has increased. The top three suppliers captured 39.6% and 37% of the total market in 1990 and 1995 respectively. In 2002, the top three accounted for 64% of total DRAM sales.
This shows that the DRAM supply base has already consolidated to a significant degree. Thus, it is clear that consolidation is not be a key factor in triggering a reduction in overcapacity, a stabilization of DRAM prices and a resulting market recovery.
To grow, the DRAM industry needs new applications to drive demand and replace the PC and Internet markets. Without new applications, the DRAM market will continue to face constant overcapacity, regardless of consolidation, iSuppli believes. |
