Transition to Direct Rambus memories remains a big unknown -- Signs of upturn sighted for battered DRAMs
David Lammers and Margaret Quan
Santa Clara, Calif. - The downturn that sent the DRAM sector into a tailspin may finally be ending. Evidence surfaced on multiple fronts last week suggesting that prices in advanced memories have stabilized and, in some cases, risen and that 1999 will bring redemption for a market staggered by three years of losses that left countless bodies by the roadside.
A scattering of industry and company data, along with gut checks from industry observers, suggested that solid sales for current Windows 98 and Windows NT systems as well as the promise of more robust workstation and server platforms on the way are finally increasing demand for DRAMs. And while a return to 1994 conditions is not expected this year, enough players have cut back or left the business altogether for supply and demand to start coming back into balance.
"I'm not saying the market's turned, but we're seeing some more positive signs," said Stuart Atkins, marketing analyst for module vendor Kingston Technologies (Irvine, Calif.). "We're seeing indications of the stage being set for a market turning in a more favorable direction."
On the data front, the American IC Exchange indicators show that in the 64-Mbit class, virtually all configurations are trading $2 to $3 above their historic lows. The company (at www.aice.com) reported that the average price of a 64-Mbit device rose 11 cents to $10.99 last week. On the broader front, the World Semiconductor Trade Statistics organization indicates that the market may have bottomed out in July, when the average selling price for DRAMs was $3.23. By October, that had risen to $4.69.
The biggest vote of confidence came from Hirokazu Hashimoto of NEC Corp., whose company, as much as any in the industry, has been battered by the slump. Hashimoto, who took over as president of NEC Electronics (the U.S. semiconductor operation) last July, said the average selling price for a 64-Mbit DRAM has stayed above $10 so far this month, compared with about $8 last summer. Normally, DRAM demand drops off in the first quarter. However, both Samsung Electronics and Micron Technology are believed to be planning major 64-Mbit production ramps this quarter, Hashimoto said.
Jan du Preez, vice president of memory products at Siemens Microelectronics (Cupertino, Calif.), said consumer stores are reporting higher PC unit sales and memory configurations are rising, in desktop systems, from 64 to 96 Mbytes and above. The same trend is true for workstations, he added.
"Typically what happens is when memory is cheap, programmers expand memory content," said Chee Ho, director of product marketing for Siemens Microelectronics. "So once you get a megabyte-per-system level fixed, that typically doesn't go backwards, it only increases."
While general memory requirements appear to be on the rebound, the big unknown remains the ramp of the new Direct Rambus DRAMs. Intel is shipping prototypes of its Camino chip set in the current quarter, and the major PC OEMs are expected to have systems on the market by the third quarter that match the 0.18-micron Katmai processor, Camino and RD-DRAMs.
Intel, Rambus and some of the more bullish analysts are predicting that about 250 million units of the Direct RDRAMs will ship in 1999. Hashimoto said NEC managers are now facing a tough decision: How many testers and other back-end equipment must be ordered now to meet Direct RDRAM demand.
NEC has more Rambus manufacturing experience than other vendors by virtue of its supply to Nintendo Ltd. (Kyoto, Japan), which used the 18-Mbit RDRAM in its Nintendo 64 game machine.
"From the silicon point of view, changing from SDRAM to the Direct RDRAM is not so difficult. We have shipped tons of Rambus memories to Nintendo," said Hashimoto. "But a lot of testers are needed. One estimate is that an investment at the back end of about $8 million to $10 million is needed to produce 1 million units of Direct RDRAM. If you assume that the industry will have enough 0.25-micron capacity at the front end, the question is whether the industry will invest the $2.5 billion or so needed to support the 250-million-unit Direct RDRAM scenario."
Japanese companies will need to invest to keep up with Micron, Samsung and the combined Hyundai-LG Semicon operation. But Hashimoto noted that "Japanese companies are in a very, very tight financial situation this year," because of continuing problems in the domestic economy. He declined to speculate as to whether NEC would increase its semiconductor-related capital expenditures, but said that the head of NEC's electronic devices operation, Hajime Sasaki, has said that NEC wants to hang on to a 10 to 15 percent share of the worldwide DRAM market. NEC had 11 percent last year, Hashimoto said.
Overall, NEC garnered $1.7 billion in semiconductor revenue in North America last year, down from more than $2 billion in 1995.
Meanwhile, Intel's plans for Rambus-based high-end desktops raise the question of how large a premium users will pay for the additional performance promised by the Rambus architecture. RDRAMs can double the memory bandwidth in a typical system.
A $100 premium
Based on the need for more-expensive testing and packaging, Hashimoto said the Rambus solution could result in about a $100 premium, compared with a similar system stuffed with synchronous DRAMs.
"The thing we must watch is how many customers will pay the $100 difference to get improved graphics," he said. "Perhaps Intel will price the CPU and chip set so that the system cost comes out to be more attractive, with the promised performance increase. My personal view is that we will see shipments of about 150 million to 200 million Rambus memories this year."
Kingston analyst Atkins said he's hearing that Direct RDRAM premiums will be in the 10 to 25 percent range over conventional SDRAMs, and it's unclear what effect that will have on the device's success.
"Then you've got royalties also," Atkins said. "In a PC market with price premiums and a market under price pressures, do the DRAM manufacturers want to pass those premiums on? That's a big question." He added that in the high end, where Direct RDRAMs will first be targeted, it may be easier to pass on the cost.
The DRAM makers are evaluating Rambus testers now from all of the major tester manufacturers. Hewlett-Packard Co. has developed a Rambus tester that can handle 32 devices in parallel, but the system is not yet completely production worthy and the price tag is $3 million to $5 million. Advantest Corp. has fielded a tester that can handle eight Direct RDRAMs in parallel, and other tester companies are readying systems for benchmarking.
The high cost of those testers, the need for chip-scale packaging and increased testing for the RIMMs (Rambus in-line memory modules) will result in a stiff premium-as much as 60 percent-at the device level for the Direct RDRAMs later this year.
The first upbeat news for memory in more than a year came on the heels of a Dataquest report showing preliminary final numbers for 1998 and the widespread damage the DRAM downturn caused. Seven of the world's top 11 chip vendors experienced revenue declines of at least 14 percent last year, according to estimates by Dataquest (San Jose, Calif.), a unit of Gartner Group Inc.
In general, DRAM manufacturers fared worse than other chip makers. But Siemens bucked that trend and grew more than 12 percent, said Kevin McClure, senior market-research analyst in Dataquest's worldwide research operations group.
Three European vendors-Philips, STMicroelectronics and Siemens-landed in Dataquest's Top 10 ranking for the first time last year. Europe was the only geographic region that saw revenue gains outnumber declines. Seven of Dataquest's Top 10 vendors posted increases in European revenue in 1998. |
