Capital Spending

US Plans Response to China’s Chip Plan

Presidential SealOn its way out the door the Obama Administration put together a proposed response to China’s plans to invest $150 billion in the semiconductor market over the next five years.  It seems that US semiconductor industry views China’s investment as a threat to its position in the market.

Last week the President’s Council of Advisors on Science and Technology (PCAST) delivered a 25-page Report to the President entitled: “Ensuring Long-Term U.S. Leadership in Semiconductors.”

You might ask: “Who is PCAST?”  The organization states its mission in this paragraph: “The President’s Council of Advisors on Science and Technology (PCAST) is an advisory group of the Nation’s leading scientists and engineers, appointed by the President to augment the science and technology advice available to him from inside the White House and from cabinet departments and other Federal agencies. PCAST is consulted about, and often makes policy recommendations concerning, the full range of issues where understandings from the domains of science, technology, and innovation bear potentially on the policy choices before the President.”

PCAST has a small Semiconductors Working Group whose elite members include Continue reading

Understanding Samsung’s DRAM CapEx Cut

Historical DRAM Wafer ProductionAccording to a Business Korea article Samsung announced, during a June 14 investor event, plans to reduce its DRAM capital spending and shift its focus to 3D NAND.

The Memory Guy sees this as an unsurprising move.  This post’s chart is an estimate of DRAM wafer production from 1991 through 2014.  There is a definite downtrend over the past few years.  The peak was reached in 2008 at an annual production of slightly below 15 million wafers, with a subsequent dip in 2009 thanks to the global financial collapse at the end of 2008.  After a slight recovery in 2010 the industry entered a period of steady decline.

The industry already has more than enough DRAM wafer capacity for the foreseeable future.

Why is this happening?  The answer is relatively simple: the gigabytes per wafer on a DRAM wafer are growing faster than the market’s demand for gigabytes.

Let’s dive into that in more detail.  The number of gigabytes on a DRAM wafer increases according Continue reading

Backing Out DRAM Process Rules

Inotera HQInotera recently announced earnings and posted an impressive 55% gross margin.  Inotera is a pure-play DRAM maker, so it’s not too difficult to estimate the company’s process geometries based on its financials.

The Memory Guy thought it might be interesting to determine what I could from the 55% gross margin number.

First of all we can estimate Inotera’s manufacturing cost/GB based on the gross margin and an assumption about the company’s sales price/GB.  The WSTS price per gigabyte for November was $7.83.   Assuming that Inotera’s ASP was equal to this number, then at a gross margin of 55% the company’s cost/GB would have been $3.52.

Inotera’s acts as a foundry for Micron Technoogy.  If Inotera sold to Micron at some lower price, then Inotera’s production costs would necessarily be proportionally lower to maintain the same gross margin.

Using the WSTS price: At a processed wafer cost of $1,600 (my rule of thumb) a $3.52/GB cost would require 454 8Gb dice to be produced Continue reading

3D NAND’s Impact on the Equipment Market

Costs to Migrate to Next Lithography Node - Applied Materials (click to enlarge)A very unusual side effect of the move to 3D NAND will be the impact on the equipment market.  3D NAND takes the pressure off of lithographic steps and focuses more attention on deposition and etch.  The reason for going to 3D is that it provides a path to higher density memories without requiring lithographic shrinks.

This sounds like bad news for stepper makers like ASML, Canon, and Nikon while it should be a boon to deposition and etch equipment makers like Applied Materials, Tokyo Electron, and Lam Research.

In its summer 2013 V-NAND announcement, Samsung explained that it would be Continue reading

SIA: Memories Drive Record Semi Revenues

SIA LogoThe SIA yesterday released the WSTS semiconductor sales data for September.  Monthly revenues reached a record $27 billion driving third-quarter revenues to their own record of $81 billion.  This was the seventh straight month of semiconductor growth, the first such run-up since 2010.

This quote, by SIA CEO Brian Toohey really caught The Memory Guy’s eye: “Sales of memory products have increased sharply compared to last year and continue to be a major driver of industry growth.”

A lot has been happening to drive this increase in memory revenues: The recent SK hynix fire increased DRAM prices, but Continue reading

Applied’s Take on 3D NAND

Applied Materials expects for 3D NAND to grow the etch & CVD markets by 50%Early this month I was invited to participate in Applied Materials’ (AMAT) Analyst Day.  The sessions were rich in data covering the markets that would profit the company over the next few years.

Naturally, The Memory Guy fixated on those presentations that dealt with memory.  When it came to the upcoming transition to 3D NAND, AMAT had a lot to say.

A later post will explain what 3D NAND actually is.  Suffice it to say that today’s approach to making NAND flash has nearly reached its limit, and the approach that manufacturers plan to use in the future involves making NAND strings that stand on their ends.  This has phenomenal implications on Continue reading

Toshiba to Cut NAND Production by 30%

Toshiba's Fab 5 in YokkaichiIn a surprise announcement Toshiba has said that it will immediately cut NAND flash production by approximately 30%.  The company explains that this is being done “to reduce inventory in the market and improve the overall balance between supply and demand.”  Toshiba’s release implies that this move is expected to improve prices, which have dropped as low as $0.31/GB recently.

By common measures of market share, which typically leave out SanDisk (for reasons too complex to discuss here) Toshiba holds a share of roughly 30% of the NAND flash market.  By cutting its output by 30% Toshiba would be reducing overall NAND supply by 10%.  If we were to include SanDisk, then that percentage would decrease to about 7.5%.  Either one of these is significantly more than Continue reading

Why DRAMs are Like Steel

The McKinsey Consulting Steel ModelOver lunch today I had a conversation with an alum of McKinsey Consulting who remarked that the DRAM business behaved in a way that was similar to the McKinsey Steel Model.  For those unfamiliar with this model I found a slideshow HERE that refers to it a good deal.  (So far I have not found a tutorial on the model itself, but if anyone knows were to find it The Memory Guy would highly appreciate hearing about it.)

One interesting thing is that this particular McKinsey alum was not the first to point this out to me.  About 15 years ago a family friend/McKinsey alum told me exactly the same thing.  It seems that the economics of the DRAM business have changed little over the past 15 years, and the McKinsey steel model applies to DRAMs just as well now as it did then.

In a nutshell, the model posits that the market price for Continue reading

DRAM Consolidation in 2012?

History of DRAM Market Share by Company2012 is likely to be a year in which the DRAM market consolidates a little bit more.

Consider this:

  • At its peak in the late 1980s the DRAM market sported 23 suppliers.
  • Today there are 6 suppliers of any note: Samsung, Hynix, Micron, Elpida, Nanya, and Powerchip
  • The already-depressed market is only going to worsen in 2012.  Capital spending in 2010 is seeing to that.  Although many believe that prices cannot get any lower, that is exactly what they will do in 2012. Continue reading

Contact

Jim Handy Objective Analysis Memory Market Research +1 (408) 356-2549 Jim.Handy (at) Objective-Analysis.com

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