New Forces Are Changing DRAM Market Landscape

Electronic News, March 5, 2001 by Farhad Tabrizi

Product diversification, new designs call for even greater usage

HYUNDAI ELECTRONICS INDUSTRIES CO. LTD.

SAN JOSE -- Two major forces are changing the landscape of the DRAM market--diversification of the product portfolio and a revision in after-market channel sales -- and the contributing factors are uniquely interesting. With this diversification, expansion of the consumer base and a myriad new DRAM opportunities will further propel the market.

Looking at the entire DRAM market, the non-PC portion is capturing an increasingly larger share of the market. We anticipate that non-PC share to grow from the 19 percent seen in 1999 to 47 percent by 2004 (see Fig. 1). For that portion of the DRAM market that winds up in PCs, which accounted for 61 percent of DRAM consumption in 1999, we expect it to shrink to 40 percent in three to four years.

Where the Potential Is

However, the real growth potential is within the consumer electronics sphere. New generations of digital electronics, such as home entertainment and communications systems, will require greater quantities of memory. Video, audio, programmable DVD, voice-over-the Internet, home surveillance, video phones and video conferencing, Internet downloads and a multitude of other services and technologies not possible with analog-based appliances will expand the DRAM market for consumer electronics from 8 percent to 23 percent by 2004. With prices for HDTV, which uses 32Mbytes to 64Mbytes of DRAM, expected to drop below $2,000 within a year, the market could see a significant increase in DRAM usage. Technology shifts identify that by 2005, next-generation consumer electronics will devour nearly the same percentage of DRAM as do PCs.

In the latter half of 2001 and into 2002, the expanding use of wireless applications will also draw on DRAM resources. Based on a 64Mbit equivalent, Hyundai's worldwide DRAM communications forecast (see Fig. 2) predicts unit growth escalating from 224 million to 3 billion in 2004, with the growth largely prompted by an amplified use of DRAMs in a mixture of wireless designs. Pagers, PDAs, cell phones and other portable electronics are projected to make an important contribution to DRAM market growth over the next few years. As newer and more advanced functionality, such as voice- and e-mail-equipped pagers, reaches the market, demand for additional memory at lower cost will increase.

Wireless systems have traditionally used SRAM, but 4Mbit, 8Mbit and l6Mbit devices pose density and cost issues for next-generation wireless projects. However, 64Mbit, l28Mbit and 256Mbit synchronous DRAM are resolving these newer design challenges, and at lower prices. SDRAM, with its low power and small chip-scale package, is currently the DRAM of choice for cell phone design. Both cell phone and high-end pager OEMs are expected to use l28Mbit and 256Mbit devices in future blueprints.

In contrast, most PDA manufacturers use 64Mbit extended data out (EDO) DRAM, but are migrating to SDRAM due to price. While demand for EDO remains high, the supply is limited, which results in higher price-points. Because of this cost dynamic, OEMs are repositioning PDA designs away from EDO and toward SDRAM. As a part of this transition, PDA OEMs prefer to move voltage requirements incrementally from 3.3V to 2.5V to 1.8V.

Communications Sparks Demand

According to Phoenix-based Semico Research Corp., networking and communications DRAM use will also grow from 10 percent to 24 percent by 2004. High-end networking, with products such as WAN and LAN Internet gigabit routers and switches, employs SDRAM for main memory and SDRAM or SRAM for look-up tables and packet storage. As next-generation routers and switches advance from OC-48 to OC-192, the number of ports doubles, increasing both bandwidth and the number of DRAM megabytes required. The mode is blossoming from 2.5Gbits/sec. to 10Gbits/sec. for each port, and double data rate (DDR) is fast becoming the preferred choice for cache, look-up tables, packet storage and main memory. Low-end network systems presently use l6Mbit and 64Mbit EDO/SDR with network OEMs requesting long-term supplier support for these specific DRAM products. However, recent designs are starting to use 64Mbit and 128Mbit synchronous DRAMs.

In the graphics circle, two key trends are emerging: the high-end notebook market is surpassing desktop computers and several major manufacturers are adopting the multichip module (MCM) format. Mainstream DRAM players in notebooks draw on the 2Mbit x 32Mbit DDR device. Other OEMs are incorporating the DDR platform into their graphics controller for insertion into the notebook subsystems. Using high-density 64Mbit memory in the MCM format replaces the multiple DRAM devices used in earlier notebook designs and substantially increases board space. Set-top box designs also incorporate graphic chips. These applications use SDRAMs with speed requirements up to 143MHz.

While this market diversification assures future DRAM market growth, the classic after-market conduit is diminishing, departing from a healthy 28 percent to less than 10 percent of the RAM market. The after mar et channel is usually defined as brokers or dealers purchasing DRAMs from major manufacturers or from OEMs with excessive inventory, and selling them to smaller OEMs, subcontractors and other users. After market DRAM buyers typically represent companies that produce low-cost PCs, described as "white boxes," with no major brand name association. The prediction is that during 2001, the demand for white box PCs will weaken as chief PC makers sell recognized brand name, lower-end PCs for less than $600. With this price decrease, brand name PCs will attract more customers and white-box PC producers and their aftermarket suppliers will decline. In addition, due to economical PC pricing, customers are no longer purchasing broker channel DRAM to upgrade their PCs. Instead, they are moving to purchase new brand -name PCs loaded with bonus DRAM capability.