USA: In the dangerous game of "chicken," two drivers aim their cars at each other and accelerate to full speed. The first driver to swerve is the loser—or the chicken.

In the multibillion DRAM industry, market leader Samsung Electronics Co. Ltd. continues to play a high-stakes game of chicken, massively boosting its production even as its competitors pull back amid weak market conditions.

However, while this strategy may have helped Samsung to avoid the worst effects of weak DRAM market conditions in the first quarter, with the company increasing its share of sales and padding its lead over the competition, it wasn't enough to allow the world's leading memory supplier to generate a profit for DRAM during the period.

Samsung of South Korea sold $1.8 billion worth of DRAM in the first quarter, giving it a 30.6 percent share of global market revenue, up from 30.2 percent in the fourth quarter, according to a preliminary estimate from iSuppli Corp.

While this was 6.2 percent lower than the $1.9 billion in the fourth quarter, the overall DRAM market declined by a more precipitous 7.4 percent during the same period. Samsung also performed well compared to its nearest competitor, Hynix Semiconductor Inc. of South Korea, which suffered an 8.4 percent sequential decline in DRAM revenue. Among the top-10 suppliers, Samsung posted the fourth-best performance in terms of sequential sales growth.

The attached table presents iSuppli's preliminary estimate of global DRAM revenue market share in the first quarter of 2008.

Samsung aims high
"Samsung recently ratcheted up its already-aggressive DRAM unit growth target for 2008 to 100 percent, up from the 87-percent level that iSuppli estimated before," observed Nam Hyung Kim, chief analyst at iSuppli.

"Interestingly, Samsung announced its more aggressive unit-growth target immediately after iSuppli on Apr. 24 upgraded its rating of near-term DRAM market conditions for suppliers to "neutral," up from the "negative" assessment that had been in place since November 2007. Samsung clearly is trying to intimidate the competition with its "game of chicken."

However, iSuppli believes that DRAM market conditions now have bottomed out, and there is no further room for declines. If the market hasn't bottomed out yet, OEM DRAM buyers will encounter major risks of DRAM supply-chain disruptions because some suppliers are facing serious financial issues, and potentially could leave the business.

DRAM prices are set to rise slightly during the coming months, although industry conditions still will oscillate widely due to short-term shifts in the supply/demand balance."

Elpida puts market-share squeeze on Hynix
Like Samsung, No.-3 DRAM supplier Elpida Memory Inc. of Japan is engaging in an ambitious increase in production, with its megabyte output rising by 33 percent during the first quarter.

This caused Elpida's share of global DRAM revenue to rise to 14.5 percent in the first quarter, up from 13 percent in the fourth quarter. Company DRAM revenue rose to $857 million, up 3.4 percent from $830 million in the fourth quarter.

Elpida and Powerchip were the only suppliers among the Top 10 to increase their DRAM revenue compared to the fourth quarter.

With its rise in sales, Elpida in the first quarter managed to close the market-share gap with Hynix to only 4.1 percentage points, down from 5.8 points in the fourth quarter.

With its increase in unit shipments, Elpida in the first quarter managed to overcome a decline in its DRAM Average Selling Price (ASP) that exceeded the industry average.

Elpida also recently expanded its DRAM-manufacturing partnership with Qimonda AG of Germany in addition to its recent foundry technology agreement with Taiwan's United Microelectronics Corp. In challenging market circumstances such as those seen in the first quarter, a diversification strategy like this is not unusual.

Red ink flows in Q1
Global DRAM revenue declined to $5.925 billion in the first quarter, down 7.4 percent from $6.4 billion in the fourth quarter, according to iSuppli's preliminary estimate. First-quarter revenue came in very close to iSuppli's prediction of $5.999 billion made in its first-quarter DRAM Market Tracker report.

In the first quarter, no DRAM supplier managed to generate a profit, and losses were larger than expected. However, these enormous losses signaled the bottom for the DRAM market, in iSuppli's view, prompting the company to upgrade its assessment of short-term conditions for suppliers last week.

Amid the myriad uncertainties in the market, Samsung will continue to pursue its "game of chicken," and reap the benefits on its strong balance sheet, iSuppli believes.