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Memory Consolidation and its Impact on 450MM Fabs
The days of PC domination of memory trends for memory performance, function or usage is truly a business model of the 90's. While the PC technology delivered ever-higher productivity based on processor performance and memory capability, that was only remarkable for the period when individual business productivity drove the computing sector of the market.
But as the Internet connected users at a level that enabled the mobile consumer market, market conditions underwent a fundamental change. The Internet relies on a broad range of servers to provide the communication, data, and information access; the consumer does not obsess on the hardware as long as it is functional, attractive, and delivers the requirements. The computing functionality of the PC became relegated to secondary status as the target application for the development of new memory technologies broadened to provide equal priority between mobile and server applications.
The impact is that OEMs and end-market applications now accept a higher degree of product differentiation among the memory suppliers. Low-power mobile DRAM has already become an important element of the product differentiation that system designers demand for consumer mobile products. LPDDR2 and LPDDR3 DRAM now use a different dedicated process than DRAMs used for PC and Servers.
Additionally, volatile and non-volatile memory not only share the system memory space in an ever-growing number of end products, but they also share much of the capex in the remaining memory manufacturing companies. An extended excess of DRAM supply has a quarter-to-quarter impact on NAND availability since Samsung, Micron, and SK hynix have all demonstrated the manufacturing flexibility to shift fab capacity between DRAM and NAND.
But this shared manufacturing capability has a major downside-as a result of the general decline in DRAM demand, both Samsung and Toshiba have now announced plans to slow their capacity expansion in hope of also slowing any future excess NAND capacity.
During this attempt to balance the supply and demand, while the industry is impatiently awaiting the PC market's resumed growth, NAND SSDs continue to thrive. And in that application, system designers continue to support a degree of product differentiation among memory manufacturers' SSDs that OEMs have never before been willing to accept.
Other intelligence and insight into the NAND and DRAM market are available in our recently released quarterly update, OEM System Function Delineates Memory Types.
An interesting aspect of this weakness in the current memory market is the potential impact that it may have on another high-level industry topic-the 450mm fab. The history of the memory manufacturers is one of constant consolidation from what was over 50 suppliers in 1995 down to the four major memory companies today with complete in-house services of design, fab R/D, production and test, and worldwide sales/marketing presence with branded parts. Those four companies are of course; Samsung, Micron, SK hynix, and Toshiba.
In the winnowing down process of the past among memory manufacturers, the race to the next fab level became a life-or-death struggle as any laggards were eventually priced out of the market. Now we have reached the point that Samsung and Toshiba are contemplating a slowing in memory investments to preemptively correct for any potential oversupply, while Micron is completing its acquisition of Elpida and Hynix is adjusting from its own recent rescue by SK.
The impact on 450mm fab introduction is that Samsung is one of the three companies (along with TSMC and Intel) widely expected to be early adopters of 450mm fab technology. While we have no doubt that Samsung will be the first memory supplier to convert to 450mm, we believe that the economics are just not the same game for memory companies. In the first place memory die-and die in support of the mobile markets in general-are usually much smaller than microprocessors with onboard cache that are designed for data processing applications. Larger die of course result in a much less efficient usage of the circular wafer surface. In addition, the trend in the past among memory suppliers was to rush to the next higher wafer size and lower the manufacturing costs in order to gain more market share from the competitors who were slower to make that transition.
However the market dynamics have changed to reflect Samsung's current position. As high as Samsung's market share in memory products is at the moment, rushing into 450mm in order to squeeze out another competitor at this point may in fact increase Samsung's risk by creating too much exposure to the cyclical nature of the memory markets.
In a recent discussion of Intel's recent investment in ASML, one observer commented that, " Intel realizes they need 450mm sooner than anyone can give it to them."
We therefore believe that the collapse of Elpida and the decisions of two other memory suppliers to delay their own fab expansion plans may allow Samsung to be more flexible in its timetable for 450mm. If that is the case, a heavier burden in the pioneering of 450mm wafers may have now been shifted to Intel in order to support Intel's larger die sizes