DRAM Margins Thicken
The DRAM industry is making its highest profits in nearly three years, despite the decline of the PC business that once dominated market demand.
Operating margins were 27% during the April to June period, up from 11% in the first quarter, says IHS – the highest level of profitability since the 33% level attained in the third quarter of 2010.
High ASPs are driving margins. After 10 quarters of continuous contraction, DRAM ASPs jumped 4% in the first quarter, and grew another 12% in Q2, boosting operating margins.
“The DRAM supply base today is vastly different from the way it was two years ago, when ASPs sometimes plunged by nearly one-third within a single quarter,” says IHS’ Dee Robinson, “for the past two quarters, however, DRAM suppliers have been enjoying the fruits of industry consolidation with only three major players now left in the market, down from five in 2008. The resulting realignment in capacity has brought stability to a market that has undergone a major transition with the decline of the PC market.”
For a generation, PCs dominated DRAM demand, accounting for 65 to 85% of sales throughout the 1980s, 1990s and 2000s. However, in 2012 noted that the share of traditional PCs in DRAM revenue fell to less than 50% for the first time in at least 30 years, marking a major milestone for the industry.
Along with consolidation, strict capacity management is reining in over exuberance in production.
The best operating margins in the second quarter belonged to South Korea’s SK Hynix at an 33%, and to Elpida Memory of Japan at 32%. Both were superior to Samsung’s 28%.
Three suppliers whose margins were in negative territory in the first quarter turned positive in the second quarter. These included Micron Technology of Idaho, Elpida’s new owner, up to 12%; Inotera with 27%, and Winbond Electronics at 6 percent.
Nanya improved margin by 1%, and Powerchip had a margin of 29 percent.