If you read the business press, it’s become fashionable to predict that the crippling impact of memory gluts are history. Meanwhile, VLSIresearch previously reported that our industry is in a DRAM glut. This edition of The Chip Insider™ , provides an analysis of the ‘this time it’s different’ (TTID) predictions, addressing the question of how it’s different and do these differences matter. Is the world really different or should TTID stand for time-to-imminent-disaster.
The report examines consolidation trends, looking to previous peaks of market share concentration in DRAMS to measure the strength of market consolidation as a TTID predictor. It examines both the supply-side and the demand-side of the problem. Covering the following issues:
● How capital and technology interact with supply:
o Capital upgrade cycles
o Fab productivity
o Shrink cycles
o cost, yield, and profits
● It describes how decisions of DRAM makers are made what influences them:
o KPIs: Key Performance Indicators
o Shareholder value.
o Ability to manage prices by changing supply.
o How depreciation costs figure in.
o Importance of production scale in DRAMs.
o Inventory effects.
o Importance of market share, which is another KPI for management.
o Differences in how Asian versus American companies approach decisions.
● Efficiency of Oligopolies at controlling prices.
Samsung is not Saudi Arabia, because there is no field of DRAMs buried under the sand that is aways there, waiting to be tapped for a buck-a-barrel. Moreover, they are well aware of the fact that the DRAM gluts are like a hemophiliac convention touring a razorblade factory — those that don’t come out bleeding win. They have almost always used gluts to gain significant market share. Moreover, that big DRAM factory they are equipping is proof that this tiger has not changed its stripes.
As for DRAM demand, it is weak due to weak markets in PCs, tablets, and smartphones. Moreover, suppliers of tablets and smartphones are tremendous pressure to cut costs as the only untapped markets are in Asia, where price is everything. Moreover, the dominant players are being challenged by upstarts, lessening buyer strength for managing prices from the demand side by managing competitor share.
This report appeared in the June 19th edition of The Chip Insider™ More information is available here:
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