The DRAM industry has always been barking mad, but Q4 showed it in one of its spectacularly potty spasms.
In Q4, DRAM prices declined 31 per cent, revenues declined 19 per cent, bit production rose 17 per cent, and the industry made an operating loss of $3 billion.
The best performing company in Q4, Elpida, won that title by having its revenues decline only by 10 per cent.
Samsung’s Q4 revenues declined 12.3%, Micron’s 12.6%, Qimonda’s 23.6% and Hynix’s 33.2%.
“There’s a lesson to be learned from the fourth-quarter DRAM disaster”, says Nam Hyung Kim, director at US analysts iSuppli, “in this game of upping the production ante, no supplier wins—and the entire industry loses,”
“The DRAM people lost $12 billion in lost revenues last year by insane competition,” says Malcolm Penn, CEO of European analysts Future Horizons, “the temptation in the chip industry is to buy market share today, and worry about profits tomorrow. This year, we expect memories to stop their bleeding-to-death curve pursuing a strategy of ‘last-man-standing’ and return to the normal 30 per cent learning curve.”
“Rather than pursuing a scorched-earth policy of ramping up production to gain market share, tier-one DRAM suppliers should try to return to profitability by rationalising supply growth,” said iSuppli’s Nam Hyung Kim.
According to iSuppli, the DRAM industry spent ‘massively’ on capacity last year with the objective of ‘cornering the market and driving smaller competitors out of the industry’.
“Until the suppliers change their ways, this naïve game of scale will continue to cost the DRAM industry every year,” Nam Hyung Kim.
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