September 2000 Industry Update

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DRAM Update

A few years ago, the DRAM market was about as exciting as the competition in a quilting contest (no offense meant to serious quilters), however during the past year this industry has been very interesting to watch. The past month has been no exception.

After Rambus was able to get Toshiba, Hitachi and Oki to sign license agreements granting Rambus royalty fees for SDR and DDR SDRAM, industry observers have been anxiously awaiting word about who might be next. There were some rumors that it might be NEC, but after Rambus filed suit against Infineon, the ‘smart money’ was on them.

Then, in a somewhat surprising move, Micron filed a U.S. lawsuit at the end of August, charging Rambus with anti-competitive practices and alleging that the patents claimed by Rambus are invalid and unenforcable. This was quickly followed up with a similar suit filed by Hyundai. This week, Rambus filed suits against Micron and Hyundai in Europe, apparently hoping to either tackle Micron outside of their ‘home court’, or possibly to take advantage of more stringent patent laws in Europe.

Though normally these issues rarely ever actually go to court, some sources familiar with Micron have indicated this one will have to be resolved in front of a judge. Apparently Micron views this as an issue based upon principles, and if history is any indication, they are not reluctant to stick to their claims all the way to the end – win or lose.

Though the media likes to focus on DRDRAM and DDR SDRAM, implying the market share battle is there, the reality is that the expected market share for both of these memory types will likely be under 2% for the entire year. Manufacturers see both DRDRAM and DDR SDRAM as occupying niche markets for the next several quarters, with DDR filling the server space, and DRDRAM mostly selling into the workstation space, with some crossover between the two. SDR SDRAM will continue to dominate the mainstream and value segments.

SDR SDRAM

Most manufacturers see SDR SDRAM as the greatest volume DRAM product for at least the next year. However, forecasts that prices would remain strong through the end of the year seem now to have been very optimistic. During the past month, spot market prices have softened, with 64Mb parts dropping below $8.00, and 128Mb parts selling for close to $17. Recent reports indicate that manufacturers think contract prices may drop by as much as 20% next month.

Part of the reason for this lack of demand appears to be a very slow start to the ‘selling season’, which has manufacturers and vendors somewhat worried. In addition, there seems to have been some stockpiling during the summer months in anticipation of an increased demand, but this never occurred. As a result, those holding on to stockpiles of DRAM chips are now starting to aggressively sell, hoping to avoid large losses and driving the price lower.

DDR SDRAM

For several months, sources within Micron have been optimistically claiming that DDR would be shipping in volume before the end of Q3, and most certainly by the beginning of Q4. Right now, it looks questionable whether we will see real volume before the end of Q4.

AMD has been working very closely with Micron to enable the DDR platform, and feel confident that product will be shipping by mid-Q4. Micron has indicated that they feel AMD is closer than any other manufacturer to having a functional DDR chipset.

One of the most troubling reports, which was provided by an anonymous member of Team-DDR, is that Micron is seeing incompatibilities between modules and chipsets. Currently, though Micron lists DDR modules as being available through Crucial Technology, there are a very limited number of them, and all are 64MB parts. Further, none of these modules will function on all DDR capable chipsets. As of last week, it did not appear that the problem had been identified yet. Amazingly, several motherboard manufacturers indicated that they were Beta testing DDR boards, and had not encountered any such problems – but they may be using a pre-validated set of modules.

DRDRAM

Despite the best efforts of Rambus, Inc., most memory manufacturers seem to be edging away from DRDRAM. Recently, sources reported that Hyundai is abandoning their DRDRAM plans, and neither Infineon nor Micron has shipped any DRDRAM to date. Samsung, Toshiba and NEC continue to produce product, however the volumes are relatively small in relation to the whole DRAM market.

Prices for DRDRAM have dropped dramatically over the past 3 months, and currently stand at twice the price of an equivalent SDRAM module. While this should be considered good news, it seems that it is having little effect on demand. Both Intel and Rambus hope that the introduction of the P4 will spur demand, however it remains to be seen how well the P4 will be received. If this does happen, however, it is possible that prices will spike upward. Intel may have anticipated this with their Rambus credit program.


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