More bits, but falling prices

Electronic News, Jan 5, 1998 by Will Wade

Mountain View, Calif.--It's always been hard to play the memory game, and 1998 will be no exception. Although more and more storage cell bits will find their way into electronic systems, overall prices will continue to fall. Strong growth is expected in both traditional markets, including PCs and communications, and emerging new applications such as consumer electronics.

That's good news for memory manufacturers who must ship in huge volumes to make up for ever-shrinking price margins. The bad news is that increasing competition between various memory technologies, along with increasing segmentation within the different types of memory ICs, is going to make it harder than ever to predict which chips will be big sellers.

The big news in the DRAM world is going to be faster chips, but the bigger news is going to be shortages of products which meet Intel's PC100 spec. The flash market will continue to see growth in the data storage segment, while low-voltage and code storage will remain strong. And SRAM will be fighting to hold onto its traditional place in high performance systems, as the technology comes under fire from new, high-speed DRAM devices.

This coming year will see two major technological transitions in DRAM, according to Gene Cloud, VP of marketing at Micron Technology, the largest U.S. memory manufacturer. He predicts that synchronous DRAM (SDRAM) will become the dominant form of main memory, finally displacing EDO DRAM. And perhaps more importantly, faster SDRAM in the form of 100MHz chips complying with Intel's PC100 spec will become the dominant form of SDRAM by the end of the year.

The first transition is a natural evolution, while the second shift is the result of Intel's efforts to push the industry towards supporting faster microprocessors. Main memory has long been a system bottleneck, holding most current desktop systems to only 66MHz. Many OEMs have announced plans to ship PC100 systems early this year, and are waiting anxiously for the memory companies to begin ramping the chips.

"Meeting the PC100 spec is very challenging," notes Mr. Cloud. "There's a chance that not all DRAM companies will be able to meet it reliably, and there is the potential for shortages to occur in the PC100 area." With the bulk of new PCs this year expected to use PC100 products, this could cause significant problems in the industry, and DRAM companies with the desired chips will find themselves in a very strong position.

Currently, Hyundai Electronics America, Texas Instruments, Samsung Semiconductor and Siemens are among the companies which have announced they are producing PC100 SDRAM. However, some companies are having trouble meeting the requirements, and some reports state chips from IBM and Fujitsu have failed initial tests.

Not only will there be two types of SDRAM, standard and that which meets the PC100 spec, available this year, densities are increasing and 64-megabit products are emerging as the dominant configuration. But smaller densities are still popular, meaning manufacturers have a wide variety of products to sell.

Avo Kanadjian, VP of memory marketing at Samsung, says this makes his job even more challenging. Given the cycle time required to manufacture chips, manufacturers need to predict what configurations will be in demand several weeks in advance. This is complicated by the shrinking lead time OEMs are demanding. "The salesperson has to become a specialist in forecasting the product mix," he notes.

Pricing is always an issue in the DRAM market, and the recent upheaval in the Far East may make the market even more turbulent in 1998. Mr. Kanadjian predicts some shortages for PC100 chips, especially in the beginning of the year, but in general he expects enough capacity in the industry to meet the DRAM demand.

Mr. Cloud echoes this. "We're awash in capacity," he says. "For standard DRAM there's more capacity than demand." That means prices are likely to remain low in 1998, although manufacturers may be able to increase revenues by charging a premium for PC100 SDRAM components.

It remains to be seen how the market will react to the devaluation of the Korean currency, where many of the top memory companies are based. Last month, the Won fell more than 40 percent against the dollar. This left the major Korean memory companies scrambling to generate hard currency to pay overseas loans for fab machinery and other capital equipment. Hyundai was reported to be looking for financing to complete a fab in Oregon, while Samsung has recently opened a new facility in Texas, but it may have to slow its plans for expanding it.

Many observers expect to see less capital outlay from the Korean companies, especially with the International Monetary Fund dictating some of the country's economic policies. While this will likely have long-term effects on the Korean companies' ability to play in the memory market, there has been some short-term fear that they will flood the market with cheap DRAM in an effort to generate cash.