DRAM market surprisingly strong in 3Q; Samsung, Taiwan firms surging

November 15, 2006 – Surprising growth in sales and shipments from the top DRAM memory during 3Q, including a strong push from second-tier Taiwan chipmakers, has brightened the segment’s outlook for the entire year, according to new data from iSuppli Corp.

Overall DRAM growth in 3Q was a surprisingly strong 23% sequentially and 44% year-on-year, to $9.16 billion, exceeding iSuppli’s expectations, according to Nam Hyung Kim, director and principal analyst, memory ICs/storage systems for iSuppli. iSuppli is projecting 2006 will be “better than expected” for the DRAM market, with revenue growth rising 24%, vs. initial projections of just 8%. Per-megabit ASPs for DRAM are seen declining by only 16% this year, vs. 40% in 2005.

Best growth among the top five firms goes to Qimonda AG, which saw DRAM sales rise 29% during the quarter to $1.55 billion, and expanded its market share from 16.2% to 16.9. The German chipmaker enjoyed a 17% sequential jump in DRAM bit shipments, while average selling prices rose 10% due to a higher mix of high-price graphics DRAM, Nam Hyung Kim, director and principal analyst, memory ICs/storage systems for iSuppli.

Samsung kept its market lead on the back of 21% higher bit shipments, and already has said it will nearly double DRAM bit growth in 2007, in an effort to widen its market share to 35%-40%. No. 5 Elpida Memory Inc. saw bit growth more than double (105%) in 3Q, and the company will likely surpass Micron Technology Inc. for the No. 4 spot by year’s end, according to iSuppli.

By far the best growth among all DRAM manufacturers is seen in Taiwan, led by Promos Technologies Inc. (59%) and Powerchip Semiconductor Corp. (30%) — and those numbers are conservative, because both companies’ foundry business negatively impacted their overall growth during the quarter, iSuppli noted. A significant increase in commodity PC DRAM prices, mainly in the spot market, gave these firms a leg up on tier-1 rivals in terms of growth and profitability.

Citing the improved conditions, iSuppli has once again revised its DRAM segment forecast, to about $33 billion, a 33% increase from 2005, vs. projections of 24.4% annual growth to $30.88 billion. Weeks ago the firm noted that September represented a two-year high in the overall climate for DRAM producers due to improved prices, inventories and other market trends. But now the only direction is down, as production shifts from NAND to DRAM and supplies start to build up, particularly for DDR2 SDRAM.

Thus, in early October Kim downgraded his outlook of market conditions to “neutral” from “positive.” And now iSuppli currently predicts a 7% sequential decline in 4Q06 for DRAM average selling prices, and slower sequential revenue growth of just 5%.

Global top-10 DRAM suppliers, 3Q06 (preliminary)
(Revenues in US $M)

Company……….2Q06 revenue………..3Q06 revenue……….% growth……….3Q06 market share

Samsung…………..2130.0……………………2550.0………………..20%…………………..27.8%
Qimonda…………..1206.0…………………….1551.0……………….29%………………….16.9%
Hynix…………………1174.0……………………1445.0……………….23%…………………..15.8%
Micron…………………854.0………………………976.0……………….14%…………………..10.6%
Elpida…………………764.0……………………….939.0……………….23%…………………..10.2%
Nanya…………………534.0………………………601.0……………….13%……………………6.6%
Powerchip…………..342.0………………………444.0……………….30%……………………4.8%
ProMos……………….260.0………………………413.0……………….59%……………………4.5%
Etron……………………..53.0………………………..73.0……………….38%……………………0.0%
Winbond……………….36.0…………………………52.0……………….44%……………………0.6%
Others…………………109.0………………………121.0……………….11%……………………1.3%

TOTAL………………7462.0…………………….9165.0………………..23%………………100.0%

Source: iSuppli Corp.

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