DRAM Industry Likely To Face Oversupply in 2019 (digitimes.com)

While the global DRAM market still remains robust currently, the recent capacity ramps by Micron Technology and the planned kick-off of commercial production by China-based Fujian Jin Hua Integrated Circuit and Innotron Memory (previously known as Hefei ChangXin) could lead to oversupply for the memory in 2019, Taiwanese newspaper DigiTimes reported Thursday, citing industry sources. From the report: Samsung Electronics and SK Hynix would be forced to overhaul their current profit-oriented business strategy as both firms believe that the booming memory market, which has continued for 2-3 years, is likely to be over by the end of 2018, according to a Korea-based Digital Times report. Although Samsung and SK Hynix both stated, at their latest investors conferences, respectively, that they will continue to ramp up capacities for memory chips, the aggressive moves by rival companies have made the two companies hesitate, said the report.

Samsung has seen its share in the DRAM market continue to dive after hitting a high of 50.2% in the third quarter of 2016 as rivals including Micron have jacked up their revenues and profits. Notably, Micron has ramped up its operating margin to as high as 50% so far in 2018 compared to 20% at the end of 2016. Additionally, Samsung saw its share in the market drop to 44.4% in the first quarter of 2018, while Micron managed to ramp up its share to 23.1%, according to IHS Markit. The global DRAM market is expected to reach a peak of US$104 billion in 2018, before contracting by 1.8% and 2.6%, respectively, in 2019 and 2020, according to an industry estimate.

Comments

Good.

[Guyle]

Maybe an oversupply will bring the prices down a bit from being gawdawfully high.

Re:Good.

[Anubis IV]

RAM price trends for the last 18 months: https://pcpartpicker.com/trend...

Broadly speaking, RAM is roughly twice the price that it was two years ago, all other things being equal (e.g. from $38 to $80 and from $200 to $425), though prices seemed to have peaked sometime around the start of 2018, with them being on a very gradual decline ever since.

At the time that the price hikes started, people were saying it was due to several factories being retooled at the same time, and that we should expect the pricing to return to normal in about 1.5-3 years as those factories came back up and new ones were built to handle the increasing demand in the market. Well, it's been about that long, and sure enough, prices seem to have stabilized, may have even started to drop, and now we have more reason to believe that they'll be returning to normal(ish) soon as additional production capacity arrives in the market.

I'll believe it when I see it as well, but, at least so far, this jibes with what I've been expecting.

Re:Good.

[shaitand]

"oversupply" is a cute term. This is exactly what they mean by that, the industry is at risk of producing enough to have to lower profit margins instead of continuing to increase them. The entire point of an article like this is to collude and price fix without ever needing to actually have a meeting with their competitors.

Good

[DontBeAMoran]

Maybe Apple will finally stop selling computers with only 4GB or 8GB RAM.

Huge wildcard: politics

[mangastudent]

This El Reg article gives a good overview of just how messy the development of this PRC production capacity has been. They of course stole a lot of tech, in particular from Micron through UMC, and have added lawfare to the mix, a dubious lawsuit claiming patent infringement, and what I would guess is a much less dubious anti-trust price fixing action.

No doubt they expected Hillary to be President by the time this capacity came on-line, they'd owned the Clintons since Bill was governor of Arkansas and needed a bailout when the political machine he joined got a bit too greedy in raiding a state pension fund. Instead they got Trump, who's upping tarriffs to cover $200 billion worth of Chinese imports within 45 days, with a promised $500 billion to follow if they don't change their tune. Going to get ugly....

DRAM isn't one thing

[Kohath]

Look for an article contradicting this article within a few days. Fujian Jin Hua Integrated Circuit and Innotron Memory may supply "DRAM", but that doesn't mean they'll supply competitive DRAM for leading edge applications in volume in 2019. It's more complicated than more suppliers == oversupply.

If DRAM were easy to make then there would be a lot of competitive suppliers and low margins instead of 3 suppliers making high margins.

This article may be correct. It's more likely incorrect (or a mixed bag of correct/incorrect).

Micron stock is up today, so markets aren't taking it too seriously.

Re:I've got a question

[Fly Swatter]

Micron has ramped up its operating margin to as high as 50% so far in 2018 compared to 20% at the end of 2016

With that kind of profit taking, the fines and penalties would have to account for almost half their sales. For 2017 they exceeded $20 billion sales with gross revenue margin (profits) of $8 billion, those fines would have be near or above that to make them fear doing it again. It not called collusion, but it is. The problem is that dram companies are so entrenched it would take miracle new company with nothing to lose flooding the market to create price competition. As much as I don't trust china manufacturing, a new big player is needed that will upset the dram cartel.