Full-fledged Shift to DDR5 Expected in 2021

The authors are analysts of Shinhan Investment Corp. They can be reached at doyeon@shinhan.com and hyungwo@shinhan.com, respectively. -- Ed.

 

Growing interest in DDR5, with full-fledged shift expected in 2021

We note growing interest in the DRAM industry's transition to DDR5. Progress made on the shift to DDR5 has been slower than initially projected, but market expectations recently started to rise on: 1) rumors that Intel’s upcoming Alder Lake processors, slated for 2021, will support DDR5 memory; and 2) announcement of DDR5 standards (JESD79-5 DDR5 SDRAM) on July 14 by JEDEC, which develops industry standards for memory chips. We expect adoption of DDR5 to start with smartphones in 2020 and continue with servers and PCs in 2021.

Transition to DDR5 a big positive for DRAM market conditions

We believe the shift to DDR5 will tighten overall supply in the DRAM market. DDR5 will likely be 10-15% larger in size vs. DDR4, while offering high performance at low power consumption. Overall DRAM demand should grow with DDR5 seen attractive for adoption on new servers as well as replacement on existing servers. Meanwhile, the price premium of DDR5 over DDR4 will drive improvement in profitability for DRAM makers like Samsung Electronics and SK Hynix. Past data shows that DDR4, upon its release, demanded an over-50% price premium to DDR3.

Key beneficiaries: Backend equipment, component and substrate suppliers

DRAM backend process-related companies stand to benefit from the shift to DDR5, with new equipment/parts needed alongside changes in key specifications such as data transmission speed and operating voltage. Wider adoption of DDR5 should drives harp earnings improvement for related backend equipment/parts suppliers.

 

 

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