TAIPEI, TAIWAN: Looking back at 2008, the global DRAM industry has faced severe oversupply and industry structural problems. In 1H08, most 8-inch fabs switched to non-DRAM production. Vendors switching from 8-inch DRAM capacity to 12-inch capacity to lower DRAM chip cost claimed that they will migrate to 50nm process in 2009. At this point, the whole industry believed that the recovery will come in 2H08.

After all, the global financial crisis once again pushed the DRAM industry into the frozen period, not only did the DDR2 1Gb eTT chip price fell once below its historical low 0.58 USD, the net cash outflow put the DRAM vendors in a devastating position. After the operating crisis emerged, consolidation commenced and hopes to bring the market mechanism back to normal again.

A. Sharp fall in DRAM chip price hits industry.
According to DRAMeXchange, DRAM chip price has dropped nearly 75 percent in 2008 and the industry total loss from Q108 to Q308 was more than $8 billion. DRAM 667 Mhz 1Gb chip price fell from high of $2.29 to the low of $0.58, a 75 percent drop range. The price was not only lower than the cash cost (exclude depreciation) $1, but also close to the back end testing and packaging price $0.6-0.7, and exposed the DRAM vendors to the operating crisis. The global DRAM industry lost $8 billion in the first three seasons of 2008.

B. Nanya gave up Qimonda, Micron officially entered Inotera and gained half of its capacity.
Nanya officially announced its alliance with Micron on March 3, and it will co-develop products under 50nm process. This also means that the relationship between Qimonda and Inotera had changed. On October 12, Micron officially announced it gained the 35.6 percent Inotera stake of Qimonda, which is worth about $400 million. The Micron technology camp was officially formed.

C. Stack technology took the lead and trench technology faded.
In 2006, the trench technology camp once accounted for 23 percent of the market share. Along with the technology development bottleneck, the stack technology fell six months to one year behind. In 2008, the market share declined to 8 percent, which means the stack technology had gained 92 percent market share. In 2008, Qimonda announced its new Buried Wordline technology, the trench technology will be history.

D. Oversupply drove the capacity cut.
After PSC first announced capacity cut this September, Elpida, Promos, Nanya, and Inotera continued to follow. The global DRAM capacity decreased nearly 20 percent. Recently, the Taiwanese vendors are the most aggressive ones to cut capacity, and have cut about 29 percent capacity which is the most among all vendors. A capacity cut not only can reserves cash for vendors to survive through the industry winter, but it can also speed up the market inventory consumption, lower the inventory level, and let the market go back to its normal market mechanism.

E. Uniting of Taiwanese, American, and Japanese DRAM vendors, to fight against the Korean vendors.
After Samsung announced it’s 100 percent annual bit growth target, with its title of global DRAM leader, Samsung would like to see some other DRAM vendors being driven out of the market. The Taiwanese vendors bonded themselves closer to their technology partners, Elpida and Micron, with closer co-operating relationships in order to survive, forming two alliances with Micron and Elpida as the leaders, to fight against the Koreans.

F. Government bails out the DRAM industry
The war among DRAM vendors has become a war between nations. German company, Qimonda, has gained support from the Saxony government, bank, and its mother company Infineon, with the amount of $455 million. Hynix, the Korean company, also received $550 million support from its creditor banks. The Taiwanese government has also prepared its NT$100 billion National Development Fund to bail out the Taiwanese DRAM industry.