16M DRAM Exodus Sparks Price Surge
From Page One of Electronic News: November 16, 1998 Issue
San Jose--The stampede of dynamic RAM manufacturers out of the 16-megabit market has created dramatic price hikes and shortages in that density. Spot prices in some cases have doubled in a matter of weeks, and contract prices are starting to follow suit.
The situation is forcing some OEMs to accelerate their plans to redesign their systems to accommodate 64-megabit parts, and at least one major DRAM supplier is slowing its phase-out of 16M memories to meet demand.
While pricing has also risen in 64M devices, the situation there is more subdued because chip manufacturers haven't scaled back production to the same degree as with 16M parts, which memory suppliers have virtually abandoned because of rock-bottom pricing.
"A couple of months ago, prices were about $1.50 each, so people decided not to make 16-megabit devices. Nobody could make a profit," said Jeff Mailloux, DRAM marketing manager at Micron Technology. "I have seen prices as high as $3 or $4 recently because of the production cutbacks.
"We are making a limited number of parts but also phasing out 16-megabit products. That is happening sooner than some predicted and that's why that (dramatic spot price increase) is happening.
"People are having a hard time getting the 16-megabit now. A lot of capacity has been brought off-line" noted Bruce Walicek, an analyst with BT Alex Brown. "There is still a lot of 16-megabit usage out there. They are using it in networking systems, for example."
16M DRAMs are today also designed into trailing-edge PCs that still use SIMMs (single in-line modules. "An issue causing concern among customers is lack of 5-volt parts. This is causing them to redesign systems," to use 3-volt memories, Mr. Mailloux said. A number of foundries are willing to make 16-megabit EDO on a contract basis, he added.
Mr. Mailloux said he is also seeing a rise in 64M prices but not at the same dramatic level as 16M memories. Most of the increase has been in spot prices. 64M memories have been hovering around $9.50 and $10.50 and the consensus is they will settle around $10.
Demand for 16M DRAMs continues to exist in the telecommunications sector, said Bart Ladd, senior product marketing manager for NEC's Memory division. "We also see demand for 16-megabit in the aftermarket where they are trying to build 8-megabit by 32s in EDO, or fast page for that matter, for existing systems. Some Pentiums still use 8-meg by 32," he noted, adding, "There is still demand to put memory upgrades in those old 486 systems.
"We are definitely seeing a shortage in 16-megabit fast page EDO and 64-meg PC 100 and 64-EDO devices. It's a very strong demand this time of year. It's related to year end PC sales but also people have had a tougher time ramping up 64-meg PC 100 than they had anticipated. Another possible reason on 16-meg EDO is Micron filing their accusations of dumping against Taiwanese suppliers. This may have raised some concerns about availability," Mr. Ladd said.
Like Micron's Mr. Mailloux, Mr. Ladd is also seeing a related rise in 16M contract DRAM prices . "Yes we are, but not to the degree as in spot aftermarket. But the contract market is moving up."
Mr. Ladd said NEC will continue to shift its production to 64M DRAMs but does not plan to discontinue 16M devices altogether. "We have cut back on production on 16-meg. I don't believe we've shut anything down. We will continue to make 16-meg synchronous DRAMs, but in terms of EDOs we are phasing that down on a customer by customer basis."
Spot prices of 16M DRAMs are around $3.50, said Avo Kanadjian, vice president of memory marketing for Samsung Semiconductor. In response to the emerging shortages, Samsung is slowing its phaseout of those parts, he added.
Non-PC applications including workstations, servers, and some consumer and communications products continue to use 16-megabit parts, said Steve Cullen, senior analyst with Cahners In-Stat Group, Scottsdale Ariz.. "These products tend to have a longer product life, and it takes them longer to convert. There is still a need for EDO and fast page DRAM rather than SDRAM."
Despite the shift toward 64-megabit, the 16-megabit still represented 62 percent of DRAM units shipped in the third quarter, or 548 million units. In pricing, they represented 32 percent of the $1.05 billion DRAM market during that period. The peak month for shipping 16-megabit parts was in March, when 224 million units sold. In September, that number was down to 177 million units, Mr. Cullen said.
There is still some doubt in the industry that the 3-year price swoon is truly over, particularly for 64-megabit memories. "Many of the DRAM manufacturers I spoke to in the Far East are very skeptical that any increases can really stick," said Drew Peck, an analyst with Cowen & Co. "Overall production levels are still very high, and the impact of lower capital investment won't really be felt in the DRAM business until probably 2000." Concern also exists that rising prices are prompting chip manufacturers, in Korea particularly, to increase output of 64-megabit parts, which would hurt prices once again.
One analyst speculated that memory makers were hiking prices on 16-megabit parts to speed the transition to 64-megabit. "Anytime a leader wants to get out of the low density DRAM market, they raise the price," said Jim Handy, principal analyst with Dataquest. |
