Memory Supply-demand Conditions Improving
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
SK Hynix has released its DDR5 PC DRAM, which is 1.8x faster than DDR4 and consumes 20% less power. In addition to helping drive up demand for PCs and servers, the emergence of the new high-bandwidth product should positively impact margins at related players.
DDR5 PC DRAM launches
On Oct 6, SK Hynix released its DDR5 DRAM product. Following product development in Nov 2018, a variety of testing with major partners was carried out and completed. DDR5 DRAM boasts transfer speeds of 4,800-5,600 Mbps, a 1.8x increase compared to that of DDR4 (3,200 Mbps). And, with operating voltage being reduced from 1.2V to 1.1V, power consumption is cut by 20%. The DDR5 comes with built-in error correcting code (ECC) inside the chip to increase operational stability.
In Jul 2020, the DDR5 standard was officially announced by the Joint Electron Device Engineering Council (JEDEC). Starting with the launch of SK Hynix’s DDR5 lineup, several companies are to begin mass production of DDR5 from end-2020. We expect the DDR5 market to grow in earnest from 2021.
Memory market to improve from 1Q21
We believe the release of DDR5 is positive for memory companies such as SK Hynix. In particular, the launch of the new high-bandwidth product should contribute to driving up PC and server demand. Chipmakers are expected to enjoy a rise in profitability stemming from the emergence of high-ASP products requiring only limited changes to the front-end process. In 2021, DDR5 sales are forecast to account for 10% of SK Hynix’s total DRAM sales.
Thanks to robust demand for game consoles and notebook PCs, memory supply-demand conditions are improving. Smartphone makers’ memory orders aimed at occupying the empty spot left by Huawei are picking up. And, data center vendors are restarting their memory purchase negotiations. We expect DRAM contract prices to fall q-q in 4Q20, flatten q-q in 1Q21, and turn to rise again from 2Q21. Of note, the foundry utilization rate (a gauge of downstream IT demand) has stayed at 100% as of late. With lead times for the products of leading foundries expanding to over six months, some clients are even paying a premium to secure foundry capacity.