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Exec: Memory business model is broken
EE Times
(06/25/2009 7:51 H EDT)
SANTA CLARA, Calif. -- The business model in the memory sector is broken, prompting the need for more rational behavior and consolidation in the industry, according to an executive at the Memcon technology event here.
The current and horrific memory downturn continues to take a toll on vendors, many of which are losing vast sums of money. And two companies--Qimonda AG and Spansion Inc.--have separately filed for protection under bankruptcy.
What's next? Observers wonder if Taiwan's DRAM makers will go under. Even the bigger players--Elpida, Hynix and Micron--are on the ropes.
Some are expecting a recovery in the memory sector by the fourth quarter of 2009 or first quarter of 2010. Others are not so sure, as demand and average selling prices (ASPs) remains soft.
''The memory business model is broken,'' said Darrell Rinerson, chairman, president and CEO of Unity Semiconductor Corp., a next-generation memory hopeful.
The shattered model is having an ominous impact in the supply chain. Many ''vendors are fighting for survival,'' Rinerson said in an interview at Memcon. ''It is coming down to the mentality (of which memory vendor) will be the last man standing'' if or when the down cycle is over.
For years, the memory business has seen its share of bad cycles. Memory downturns are caused by lackluster demand, soft prices and oversupply.
The current downturn is no different in that respect. Demand has been weak. And in recent times, there was a wave of unrestrained and irrational capacity build-up, especially in Taiwan.
But the current memory downturn is somewhat different than past cycles, Rinerson contended. In the past, the boom cycles enabled vendors to generate an abundance of cash, which would be directed towards new capital and innovative products.
Now, the boom times generate cash, but ''not enough for pay for capital (expenditures),'' he said. ''Vendors don't have enough cash to innovate.''
The outlook, according to the Unity executive, is gloomy. There is no sign that the memory business model can be fixed, as many vendors have fast become debt machines instead of true innovators. Vendors can't escape the vicious debt cycle and the memory business model continues on a ''downward spiral,'' he said.
For some time, semiconductor analysts have urged memory makers to consolidate--and forget about the proposed bailouts--in an effort to restore profitability and sanity in the sector. Vendors must also take a more rational approach to scaling and product pricing, analysts said.
Most of the calls have been directed at Taiwan, but the island's DRAM have refused to consolidate.
Glimmer of hope
There is light at the end of the tunnel. The timing is ripe for new technologies in the sector, particularly for storage-class memories in servers and other systems, he said. Storage-class memories are next-generation devices that bridge the I/O gap between the processor and a disk drive in a system.
Storage-class memories includes some (but not all) of the so-called ''universal memory'' types, such as FRAM, MRAM, phase-change, RRAM and other newfangled technologies. As before, most--if not all--next-generation memory types are still years' away from becoming a reality. Some wonder if any of the new technologies will ever go beyond the prototype stage and will actually ship in volumes.
Most will get pushed out over time, as the incumbent technologies--DRAM, NAND and NOR--continue to scale and find new applications, said Jim Cantore, president of consulting firm JLC Associates.
Developers of the newfangled technologies are still scrambling to devise their parts--and for good reason. The storage-class memory sector is expected to grow from zero and hit $50 million in 2009, said Alan Niebel, chief executive of Web-Feet Research. By 2015, the storage-class memory sector could hit $6 billion, he said.
There are several players in the arena. More recently, Unity Semiconductor unveiled its nonvolatile memory technology. The company's technology, called CMOx, is based on the use of new materials called conductive metal oxides that are said to enable ionic motion. With the technology, Unity claims to have devised a passive rewritable crosspoint memory array that requires no transistors in a memory cell.
Another startup, called Qs Semiconductor Corp., came out of stealth mode on Wednesday (June 24) and said that it is developing a nonvolatile memory, based a carbon-silicon or silicon carbide (SiC) on silicon substrate technology.
Nonvolatile memory supplier Numonyx BV and memory chip giant Samsung Electronics Co. Ltd. this week announced that they will develop package specifications for phase-change memory products together. Common specifications between the two companies will be completed this year, with both companies expecting to have compliant devices available in 2010.
Future parts are aimed for a new standard. The upcoming standard, based on the JEDEC 42.6 interface definition is set to be an implementation of an LPDDR2 interface. The standard is set to be applied to a next-generation memory at 1-Gbit implemented in 45-nm process that is being aimed at mobile phone, embedded systems and high-end computing devices, Numonyx said.
Cell-phone giant Nokia is pushing the standard, sources said. Nokia wants phase-change in a mobile device. It is pushing Numonyx to find a second source, prompting them to forge a deal with rival Samsung, sources said.
he outlook?
The outlook for traditional memory is mixed. ARM, Denali, Synopsys, Virage and other memory interface IP vendors are now seeing an upswing in business, analysts said. The severe downturn is causing a growing number of OEMs to evaluate or rationalize their internal IP efforts, said Mark Gogolewski, chief technology officer of IP provider Denali Software Inc.
The flash memory market, including NOR and NAND, is expected to hit $18.5 billion in 2009, down 9.5 percent over 2008, Web-Feet's Niebel said.
The overall memory recession is expected to cease by the fourth quarter of this year or first quarter of next year, he said. Prices for memories are firming, while the market is beginning to see ''modest demand in multiple markets,'' he said during a presentation.
''NAND is on its way to recover faster than the DRAM market,'' added JLC's Cantore.
There are mixed signals in the market right now. NAND flash prices are expected to decline in the summer. ''Our sources in Taiwan reconfirm our thoughts that NAND chip prices will see a modest price decline in July/August of 10-to-15 prices,'' said Daniel Amir, an analyst at Lazard Capital Markets.
Some vendors are struggling in the arena. ''Toshiba faces issues with 3-bit-per-cell,'' Amir said. ''We have learned that, due to poor quality issues for 3-bit controllers made by Phison and others, Toshiba is unable to sell much of its 3-bit NAND production. While we believe this is temporary, we doubt that Toshiba is likely to aggressively increase NAND production, as previously expected, until this issue is resolved.''
What about DRAM? ''DRAM prices seem flat for July,'' he said. ''In our meetings with DRAM suppliers, we have learned that companies expect pricing to be flat in July and still see a $1.40-$1.50 range for 1-Gb pieces in the 2H of the year, which is above cash cost for many DRAM players. We believe that if prices remain in the $1.40-$1.50 range, we could see DRAM companies increase their capacity.''
DRAM inventories are also low. ''Our sources suggest that overall DRAM inventory remains fairly low at 2-4 weeks despite the lower demand in the summer period. The PC channel remains fairly healthy. DRAM inventory at module houses is higher (four weeks) mainly due to their expectation that DRAM will not move down in the near term,'' he added.
http://www.eetimes.com/showArticle.jhtml?articleID=218101455
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