Perhaps the only truism about the memory sector is that it is cyclically volatile. That being said, there are obviously patterns to the volatility that memory goes through. The recent situation for memory has been no different, but the multiple impacts from negative events have hurt pricing during the past quarter.
The most expected event in memory this past quarter has been the continued ebbing of the early DDR modules, which are truly just about at their final obsolescence moment. Demand for DDR1 and NOR flash has basically trickled to the most negligible levels according to most data sources along the semiconductor value chain.
Meanwhile, DDR2, which saw a good four years as the leading generation DRAM module, has been loosing significant market share since 2010 and is facing its end-of-life cycle. DDR2 is now forecasted to hit low single digits by 2013, the point at which DDR4 is introduced, according to this recent iSuppli report on DRAM technology.
DDR3 continues to hold the leading technology spot for DRAM modules and given its adoption rate, trajectory and the present device needs, DDR3 is forecasted to maintain its market dominance through 2014, according to the iSuppli report. 2014 marks the point at which DDR4 is seen as having finalized standards and transitions to the new module technology will be ripe for the switch.
Transitions are important right now in the memory sector, not just as we sit at the final point for early DDR modules and the pinnacle years for DDR3, but also because of both equipment transitions by manufacturers and device transitions by users. Device transitions have greatly affected the balance of demand within memory, as smart wireless devices (SWD), smartphones and tablet PCs, have favored NAND flash memory. As NAND pricing has dropped over the past quarters (see DigiTimes 7/4/11 and 7/8/11, for example), the door to increased SSDs in a wider selection of PCs has opened, further adding to the positive NAND environment recently. Contract prices for NAND dropped 15-20% in 2Q11, as a result of inventory concerns because consumer and corporate confidence has weakened, leaving excess inventory on the shelves due to "over-optimistic tablet sales forcasts," according to DigiTimes 7/4/11.
The overall positive demand trend for NAND (over DRAM) in SWDs is seen as continuing and holding for the foreseeable future. Underscoring the movement in NAND is the recent arm wrestling for top NAND supplier between Toshiba (No. 2 at 35.6% market share) and Samsung Electronics (No. 1 at 35.9% market share), as detailed in this report from iSuppli. Toshiba and SanDisk today announced the start of volume production of NAND at Toshiba's new Fab5 facility in Mie Prefecture, Japan. This facility is well-equipped against natural disasters and power fluctuations and uses 24nm process technology, according to this article by ElectronicsWeekly.
Manufacturers transitions have also been in flux since 2Q11, as lithography migrations have ebbed somewhat. Yet another iSuppli research report explores the relationship between lithography migration and cost reductions over time for the DRAM sector. iSuppli posits that while a complex set of variables is at play in determining the migration rate to more efficient lower-nanometer technology, there is a hesitancy presently among manufacturers to add too many DRAM chips to the market because of demand questions; that means that economies of scale are not being pursued because demand for those chips is not seen as strong enough.
All in all, there are a few major variables impacting memory pricing, sales, and manufacturing trends right now: device bill of materials (SWDs favoring NAND and growing SSD demand), consumer and corporate demand softness globally, and lithography transitions coupled with manufacturing decisions. Given that we are still in the low point of the annual semiconductor (and memory) cycle, analysts are not forecasting any price or demand increases until later in the year.