Samsung and Hynix set for collision, says iSuppli

Head-to-head battle over DRam market could have serious repercussions, warns report

Kim: Samsung is clearly trying to intimidate the competition.

An influential analyst has castigated two major powers in the DRam supply market, accusing them of playing “a dangerous game of chicken”.

A new report by market analyst iSuppli likens the market strategies of Samsung and Hynix, the two driving forces in the duopoly that dominates the DRam market, to two drivers aiming their cars at each other and accelerating to full speed. Either one car backs down or everyone dies, warned iSuppli.

Simon Worsley, product manager for memory at distributor Simms, said the long-term prognosis is not good. “Some chip makers are losing hundreds of millions of pounds per quarter,” he said.

“It cannot go on. Eventually there will be a bloodbath with only two or three strong players left standing. In the meantime, we have to live with price fluctuations as they try to outdo each other.”

Market leader Samsung is massively boosting production, even as competitors pull back amid weak market conditions, said Nam Hyung Kim, chief analyst at iSuppli.

While this strategy helped Samsung escape the worst effects of weak DRam market conditions in the first quarter and grab share from the competition, Nam pointed out that even the world’s leading memory supplier could not make a profit for DRam during the period.

Samsung of South Korea sold $1.8bn (£909m) worth of DRam in the first quarter, giving it a 30.6 per cent share of global market revenue. It performed well compared to its nearest competitor, Hynix Semiconductor, which suffered an 8.4 per cent decline in DRam revenue.

“Samsung ratcheted up its already aggressive DRam unit growth target for 2008 to 100 per cent, up from the 87 per cent level that iSuppli estimated. Samsung clearly is trying to intimidate the competition,” said Nam.

However, serious competition is emerging, according to iSuppli. The number three DRam supplier, Japan’s Elpida Memory, is increasing production with its megabyte output rising by 33 per cent during the first quarter.

This caused Elpida’s share of global DRam revenue to rise to 14.5 per cent in the first quarter, up from 13 per cent in the fourth quarter. Elpida and Powerchip were the only suppliers among the top 10 to increase their DRam revenue compared to the fourth quarter.

Worsley has called on the warr-ing factions to “leave it; it is just not worth it”.