DRAM sector in China confronting barriers to growth

Updated 2017-11-06 10:33:04 Global Times

Due to tight supplies of dynamic random access memory (DRAM) chips in the past year, producers such as Samsung Electronics and SK Hynix are expanding capacity and quoting lower prices to maintain their lead over competitors and keep out new entrants from China, according to a market research firm.

Experts said that chipmakers' recent moves reported by DRAMexchange, a Taiwan-based firm, are a response to the global demand side of the sector.

Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Sunday that China's market share is not big enough to cause a reaction by South Korean competitors.

"The top three DRAM players - Samsung, SK Hynix and Micron - are extremely influential in the global DRAM market," Gu Wenjun, chief analyst at Shanghai-based industry researcher iCwise, told the Global Times on Sunday. "China is still in its infancy in DRAM research and development [R&D]."

"DRAM development requires huge investment and poses risks," Wang said. "China still lacks talent in this area."

DRAM prices began to climb in the second half of 2016, driven by strong demand in the year-end busy season.

"With their current market position, South Korean DRAM manufacturers' move may not necessarily be aimed at Chinese competitors," Gu continued. "Take Samsung Electronics, which generates huge revenue from DRAM sales to Chinese mobile phone makers such as Huawei and Xiaomi."

"Top players may earn a great deal of revenue before any new players enter the market," Gu pointed out. "After all, the market may not be profitable all the time, and price wars might be fatal to the new players.

"Among the global top three major DRAM suppliers, none has much motivation to seek a partnership in China," Gu noted. "This is another roadblock for China to develop independent intellectual property rights in the DRAM area."

To successfully develop the DRAM sector in China, Gu said that it might require national alignment in fundraising, partnership selection for technology sources and intellectual property rights.

"DRAM development might not be profitable in China in the next 10 years," Gu said. "Government, industry, fund providers and academia need to develop a national strategy before any push from the provincial level," Gu added.

DRAMexchange, a market research firm that tracks memory chip pricing, is projecting that DRAM bit supply will grow by 22.5 percent in 2018, up from about 19.5 percent growth this year in 2017.

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