Hynix shines during otherwise weak Q3 DRAM market

USA: South Korea’s Hynix Semiconductor Inc. was the star performer in the global DRAM industry in the third quarter, outgrowing the other major suppliers and closing its market-share gap with No. 1 Samsung Electronics Co. Ltd.

Hynix’s global DRAM revenue rose to $1.8 billion in the third quarter, up 19.6 percent from $1.5 billion in the second quarter. The company’s DRAM market share rose to 22.8 percent, increasing from 20.6 percent in the second quarter. Hynix’s DRAM market share in the third quarter closed to within 4.9 percentage points of rival Samsung, down from 7.7 percent in the second quarter.

“Hynix’s strong growth was due to its rising Average Selling Price (ASP) premium and its aggressive increase in unit shipments,” said Nam Hyung Kim, director and chief analyst, memory ICs/storage systems for iSuppli. “The company boosted its shipments of higher-priced graphics and consumer DRAM, resulting in Hynix being the only supplier that increased its ASP sequentially among the top suppliers.”

Hynix’s strong growth in the third quarter handily exceeded the results of the other Top-5 suppliers. Micron Technology Inc. of the United States posted the next-best sequential growth, with a rise of 14 percent, 5.6 percentage points less than Hynix’s rise.

Among the Top-5, Hynix also was the only supplier to achieve growth on a year-over-year basis, with its revenue rising by 26 percent. With global DRAM market revenue down 14 percent compared to the third quarter of 2006, Hynix’s performance truly stands out.

A  disappointing quarter

Global DRAM sales in the third quarter were disappointing, with revenue of $7.96 billion, up only 8 percent from $7.4 billion in the second quarter.

The major factor dragging down the DRAM market in the third quarter was the continuing high inventory level in the supply chain, which was generated in the first half of the year. Average per-megabyte DRAM pricing declined by 1.5 percent sequentially in the third quarter compared to iSuppli’s previous estimate of a 3 percent increase.

Silver linings ahead?

Global DRAM supply increased by only 9.8 percent in the third quarter, down from a 23.2 percent rise in the second quarter. This means that bit supply growth already began to decelerate. The DRAM market has begun the journey toward rebalancing its supply/demand conditions, which should bolster pricing and supplier profitability in the future.

Following the 1.5 percent decline in the third quarter, megabit DRAM prices will decrease by a more moderate 20 percent sequential rate in the fourth quarter, iSuppli believes.

The global DRAM market in 2007 is expected to decline to $32 billion, a 5 percent decline from $33.9 billion in 2006. Megabyte unit shipments are expected to rise by a whopping 86 percent this year, compared to 52 percent in 2006 and a historical annual average of 55 to 60 percent.