The global memory industry has collapsed and the crisis has become a difficult supply chain

In the past four years, the global memory chip (DRAM) industry has been at a loss for three years. Now, the industry is still suffering from the continued decline in product prices, while practitioners are reluctant to sit still and are trying various solutions. "The finished product price is not yet half expensive." This is Elpida's helpless complaints. Although the words are exaggerated, they also vividly show the nightmare it and all its peers are experiencing.

Recently, according to Japanese media reports, Elpida, the world’s third largest memory chip manufacturer, and East China Technology, a Chinese semiconductor company in Taiwan, reached an agreement to sell the company’s subsidiary EBS’s preferred shares (amounting to 3.75 billion yen). In this way, the financial situation that Elpida is experiencing is deteriorating.

According to its financial report, the company’s combined net loss from April to September 2011 was 56.7 billion yen. The Nikkei Shimbun stated that in this case, Elpida had to sell preferred shares, and part of the proceeds would be used to repay debt and purchase equipment.

The global memory chip industry is struggling. Elpida is just one of them. The industry's overall sluggishness, the most direct reason is that the product price "slipped" endlessly.

According to a survey released by the research and development department of Taiwan’s electronics industry intelligence provider Jibang Technology, Thailand's flooding affects the global hard disk supply chain, and PC foundries intend to balance the rise in hard disk prices by controlling the purchase prices of other key components. In the off-season PC shipments, the contract price of memory chips showed a downward trend again in late November 2011. Until the end of that year, the possibility of continued decline in contract prices remains high.

For the industry, this is the situation they are most reluctant to see.

Forced Production Cuts In early 2010, memory chips were in short supply, prices rose, and peaked between April and May of that year. The gross profit margin of manufacturers also increased, but this was only a short-lived good time.

In June, market research firm Gartner predicted that the average selling price of memory chips will moderately decline during the rest of 2010, but manufacturers can still maintain healthy profits because they can continue to reduce production costs.

Gartner's prediction is that only half of the markets do experience oversupply and product prices continue to fall. However, manufacturers are not so lucky.

Elpida’s net loss of 29.6 billion yen in the fourth quarter of 2010 was far higher than the 13.7 billion yen that analysts in Bloomberg’s previous survey expected. The performance of Samsung’s and Hynix’s related businesses in the world’s top two memory chip providers also Did not meet market expectations.

In 2011, the status of the vendors was even worse. In the third quarter of 2011, only Samsung had no losses from major manufacturers. In the fourth fiscal quarter of fiscal year 2011 ending September 1, US Micron Technology lost a total of US$135 million, compared with a profit of US$342 million in the same period last fiscal year. After the publication of the financial report, the stock price of Micron Technology fell sharply. The day that Hynix profited for nine consecutive quarters also came to an abrupt end in the third quarter. Compared with the profit of 1.04 trillion won in the same period of 2010, the company’s net loss for the third quarter of 2011 was 562.6 billion won. Hynix said that weak PC demand led to a drop in chip prices, which caused its third-quarter 2011 loss to exceed expectations. The losses of Taiwan-based manufacturers have further intensified, with the total losses of Nanyake, Inacore, and Powerchip in the third quarter of last year amounting to NT$25.6 billion.

With market share as the king, expansion of production is in line with the interests of the big manufacturers, but the industrial environment is sluggish. The operators have to reduce the supply by more than once to ease the oversupply situation, thereby stimulating market demand.

The most active reduction in production is for Taiwanese manufacturers. ProMOS has significantly reduced the amount of investment since July last year when the company stated that in order to reduce cash outflows and maintain operations, it must be done with care. Subsequently, the Elpida camp of Powerchip, Rui Jing and Micron Technology's South Asia Branch, China Asia Branch and other vendors have followed suit. It is reported that Powerchip production has been significantly reduced by 50%. Huang Chongren, chairman of the company, bluntly stated: "To reduce oversupply and solve the problem of sluggish prices, only production is cut."

In mid-November last year, Japanese media reported that Elpida is considering re-cutting production again to curb further declines in product prices. Prior to this, the company had already reduced the production of PC memory chips in a disguised form, that is, putting products into wafers for the time being not to be tested and to reduce shipments. Some industry experts estimate that Elpida will continue to reduce the production capacity of its Hiroshima factory's standard products. Together with its partners, Powerchip and Ruijing, it will gradually reduce its investment. The overall reduction will reach 50% to 60%.

It is worth mentioning that, unlike the wave of production cuts joined by international giants from late 2008 to early 2009, Samsung and Hynix of South Korea did not intervene in this wave of production cuts this year. Industry data shows that the two Korean companies have a total of two-thirds of the global market share.

The research report of Jibang Technology believes that although the reduction of production by a number of manufacturers at this stage will help stabilize prices, further efforts to reach a state of balance between supply and demand will still depend on the follow-up of Samsung and Hynix, or are expected to follow suit. In 2012, the rise of Intel's Ultrabook and Microsoft's new operating system, Windows8, drove the change. Otherwise, this wave of production cuts will probably force industry consolidation. By then, the industry will probably formally become an oligopoly market. The market price of memory chips will be driven up gradually in the second half of 2012 through the elimination of weak market mechanisms.

Diversified survival Andrew Norwood, vice president of research at Gartner Semiconductor, said that in 2011 the global memory chip industry is expected to decline by 26.6% over the previous year.

At the end of September last year, Micron Technology once said that excessive supply of memory chips will impact its profitability. This warning made investors more worried about market prospects, leading to the stock price of the company immediately fell by more than 10%. Some analysts have pointed out in this regard that outsiders are eager to find more effective ways to deal with the crisis.

As of now, the only money maker in the memory chip maker is Samsung, and one of its obvious advantages over the market is its advanced manufacturing process.

Following the mass production of 30-nanometer memory chips in mid-2010, at the end of September 2011, Samsung became the first company in the world to mass-produce 20-nanometer products. Following Samsung's footsteps, Hynix's 30-nm memory chip-level products have also been mass-produced.

For relatively weak US, Japanese and Chinese Taiwanese manufacturers, technology upgrades not only survive the immediate crisis but also continue to survive without the need of South Korean opponents to fight.

Elpida will mass-produce 30-nanometer memory chips at the end of 2010, thereby increasing cost competitiveness and expanding market share. It is reported that compared with the previous 40-nanometer process, the number of chips produced per wafer after using the new process can increase by about 45%, and the production cost can be reduced by about 30%. Last July, the company began trial production of 25-nanometer products. In addition, Elpida also plans to increase production of 30-nanometer products through joint venture subsidiary Rui Jing.

The main manufacturing process for Taiwanese manufacturers is still at the 40/50 nm level. At present, the industry is also rushing to catch up with international companies. Ruijing has invested NT 1.815 billion to prepare for the conversion to 30-nanometer process, and plans to reach 88,000 wafers by the end of 2011, making it the fastest-growing Taiwanese manufacturer. The goal of Inocore is to mass-produce products based on 30nm technology in 2012.

However, Dong Yang Securities analyst Park Hyun of South Korea believes that the price of memory chips has fallen very quickly. No matter how companies reduce their spending or improve their production processes, their role in improving their performance is extremely limited.

The lower than expected PC market performance is one of the main reasons for the loss of the memory chip industry. Market research firm iSuppli pointed out that 65% of the sales of memory chips come from the PC industry. Therefore, the slowdown in the PC industry and the lower memory requirements of the new Windows will lead to further decline in memory chip demand.

Huang Chongren believes that the iPhone and iPad set off a boom in the world, which has reduced the room for growth in the PC and notebook computer market, and at the same time affected the annual growth rate of the market demand for standard memory chips from 50-60% in the past and dropped to 20-30%. .

Taiwan-based company Winbond Electronics has suffered losses for many years. In the past two years, it has withdrawn from the standard memory chip industry and turned to special memory chips such as mobile phones and televisions. This turn has helped the company usher in the most profitable year since 2000.

Although not as retreating as Winbond, but more and more manufacturers are indeed looking to cloud computing, smart phones, tablet computers and other fields, production of memory devices for servers and mobile terminals, in order to reduce dependence on the PC market .

At the same time, the outlook for the NAND flash memory market is improving. Samsung, Hynix and Micron Technology have each invested more. As the only company in Taiwan with its own technology, Li Jing urged local counterparts not to stick to standards. As for memory chips, we must actively step into the NAND flash memory field. Micron Technology should also authorize the technology in this field to South Asia Branch and China Asia Branch as soon as possible.