iPad disrupting global DRAM market, causing chipmakers to lose billions
Sales of Apple's iPad tablet computers are crushing the best laid plans of many chip makers, causing a surplus of memory chips after a massive expansion in DRAM factories were built in anticipation of conventional PC growth.
According to a report by Bloomberg, DRAM chipmakers including Elpida Memory and Hynix Semiconductor have lost $14 billion over the past three years, on top of an estimated $37 billion they invested in DRAM factory expansions in anticipation of continued demand for DRAM in the PC industry.
Historically, PC unit sales have grown as consistently as their appetite for DRAM, but when Apple launched the iPad, it delivered a variety of PC-like functions without the same requirements for DRAM memory storage, using just a quarter of the DRAM of the typical PC, with no capacity (or need) for later expansion.
The report quoted Taiwan analyst Chen Liway with Polaris Securities as saying, "DRAM makers invested too much, and they bet heavily that growth of the computer industry would always continue. That would have been OK if the iPad had never come along.?
Apple's A5 (shown below), used in the iPad 2 and iPhone 4S, incorporates just 512MB of DRAM, the same amount as its previous generation of iOS devices (albeit RAM of the faster LPDDR2 type). A primary reason for installing less DRAM is that it requires continuous power to keep the chips functional, unlike storage NAND flash RAM.
By designing iOS to conserve the amount of DRAM required, Apple can not only build cheaper devices while maintaining its profit margins, but also deliver leading battery efficiency, something that its competitors have failed to match.
Apple now ships more iPads than all the PCs Dell sells
In the last calendar quarter, Apple shipped 11.1 million iPads, which not only expanded the computing market with less need for DRAM, but also held back sales of conventional PCs. Apple actually sold more iPads than rival Dell sold in all its PCs together (10.6 million).
Sales of the iPad replaced conventional laptops at a variety of companies and schools at a time when the demand for generic PCs has matured in the US. Gartner had originally projected that Q3 PCs would achieve 5.1 percent growth globally, but reported that shipments only grew by 3.2 percent in the fall quarter.
PC sales have been in doldrums since 2008; in the winter quarter of that year, Windows sales dropped by 8 percent rather than growing by 10 percent as Microsoft had expected. Sales remained down during 2009's global financial crisis and then Apple released the iPad in 2010. Apple has since sold 40 million iPads, and may sell another 20 million during this winter quarter, according to Forrester Research.
Perfect storm hits DRAM
The iPad's shifting of consumer demand has had a profound effect on DRAM prices, 65 percent of which is used by the PC industry. The price of DDR3 2 gigabit RAM chips has fallen 61 percent this year, the report noted.
However, after investing $3.8 billion in new state of the art factories, Japan's largest RAM chip maker Elpida said it had to maintain production just to generate enough cash to cover its debt payments, adding to the supply and depressing prices further.
Flooding in Thailand, which has disrupted the supply of hard drives, may push PC unit sales down another 8 percent, according to Fitch Rating analyst Kevin Chang, rather than supporting the 5 percent industry growth that had been expected. On top of that, Microsoft's next Windows 8 is aiming at reducing its memory footprint to enable more efficient battery use, something Apple pioneered with the iPad.
Less DRAM, more NAND Flash
To balance the excess supply of conventional DRAM (used for short term memory storage by the CPU), some chipmakers are shifting to produce specialized chips such as NAND flash RAM, used in SSD storage and by devices like the iPad and smartphones to store data permanently.
While the iPad only incorporates 512MB of DRAM, it contains between 16 and 64GB of NAND flash RAM storage. PCs using SSDs, including Apple's popular MacBook Air models, use 128 to 512GB of NAND flash to replace their need for a conventional, mechanical hard disk drive.
One of the primary beneficiaries of the NAND RAM production is Samsung, which currently supplies parts for the iPad as well as SSD components. The company is the world's largest chip maker, but is also waging a war with Apple over building devices that "slavishly copy" its iPhone and iPad, a move that has Apple reportedly looking for a new manufacturer of its A4 and A5 chips used in iOS devices.
Second place Icheon and fourth place Micron Technology have both shifted their RAM to production toward NAND, which has helped both return to profitability after two years of losses.
According to a report by Bloomberg, DRAM chipmakers including Elpida Memory and Hynix Semiconductor have lost $14 billion over the past three years, on top of an estimated $37 billion they invested in DRAM factory expansions in anticipation of continued demand for DRAM in the PC industry.
Historically, PC unit sales have grown as consistently as their appetite for DRAM, but when Apple launched the iPad, it delivered a variety of PC-like functions without the same requirements for DRAM memory storage, using just a quarter of the DRAM of the typical PC, with no capacity (or need) for later expansion.
The report quoted Taiwan analyst Chen Liway with Polaris Securities as saying, "DRAM makers invested too much, and they bet heavily that growth of the computer industry would always continue. That would have been OK if the iPad had never come along.?
Apple's A5 (shown below), used in the iPad 2 and iPhone 4S, incorporates just 512MB of DRAM, the same amount as its previous generation of iOS devices (albeit RAM of the faster LPDDR2 type). A primary reason for installing less DRAM is that it requires continuous power to keep the chips functional, unlike storage NAND flash RAM.
By designing iOS to conserve the amount of DRAM required, Apple can not only build cheaper devices while maintaining its profit margins, but also deliver leading battery efficiency, something that its competitors have failed to match.
Apple now ships more iPads than all the PCs Dell sells
In the last calendar quarter, Apple shipped 11.1 million iPads, which not only expanded the computing market with less need for DRAM, but also held back sales of conventional PCs. Apple actually sold more iPads than rival Dell sold in all its PCs together (10.6 million).
Sales of the iPad replaced conventional laptops at a variety of companies and schools at a time when the demand for generic PCs has matured in the US. Gartner had originally projected that Q3 PCs would achieve 5.1 percent growth globally, but reported that shipments only grew by 3.2 percent in the fall quarter.
PC sales have been in doldrums since 2008; in the winter quarter of that year, Windows sales dropped by 8 percent rather than growing by 10 percent as Microsoft had expected. Sales remained down during 2009's global financial crisis and then Apple released the iPad in 2010. Apple has since sold 40 million iPads, and may sell another 20 million during this winter quarter, according to Forrester Research.
Perfect storm hits DRAM
The iPad's shifting of consumer demand has had a profound effect on DRAM prices, 65 percent of which is used by the PC industry. The price of DDR3 2 gigabit RAM chips has fallen 61 percent this year, the report noted.
However, after investing $3.8 billion in new state of the art factories, Japan's largest RAM chip maker Elpida said it had to maintain production just to generate enough cash to cover its debt payments, adding to the supply and depressing prices further.
Flooding in Thailand, which has disrupted the supply of hard drives, may push PC unit sales down another 8 percent, according to Fitch Rating analyst Kevin Chang, rather than supporting the 5 percent industry growth that had been expected. On top of that, Microsoft's next Windows 8 is aiming at reducing its memory footprint to enable more efficient battery use, something Apple pioneered with the iPad.
Less DRAM, more NAND Flash
To balance the excess supply of conventional DRAM (used for short term memory storage by the CPU), some chipmakers are shifting to produce specialized chips such as NAND flash RAM, used in SSD storage and by devices like the iPad and smartphones to store data permanently.
While the iPad only incorporates 512MB of DRAM, it contains between 16 and 64GB of NAND flash RAM storage. PCs using SSDs, including Apple's popular MacBook Air models, use 128 to 512GB of NAND flash to replace their need for a conventional, mechanical hard disk drive.
One of the primary beneficiaries of the NAND RAM production is Samsung, which currently supplies parts for the iPad as well as SSD components. The company is the world's largest chip maker, but is also waging a war with Apple over building devices that "slavishly copy" its iPhone and iPad, a move that has Apple reportedly looking for a new manufacturer of its A4 and A5 chips used in iOS devices.
Second place Icheon and fourth place Micron Technology have both shifted their RAM to production toward NAND, which has helped both return to profitability after two years of losses.
Comments
When times were great for DRAM makers, we paid through the nose for it!
Also, Windows 7 and Lion are not requiring more DRAM to run optimally.
The price of DDR3 2 gigabit RAM chips has fallen 61 percent this year, the report noted.
That explains why even the el-cheapo computers are coming with 4 Gigs of RAM these days. I've considered going up to 8, but RAM never seems to be a bottleneck for me. I usually have nearly 2 Gigs available.
iPad makes billions and the DRAM makers lose billions. I think Gerbil sales are hurting the pet industry. Now how much sense doe that make. Lets blame Apple for making and selling a product that hurts others.
Okay... joblessness is going up because people quit their jobs to stay at home all day to play Angry Birds on their iPads.
There... unemployment is all Apple's fault. Darn them all to hell!!!
What complete. PC sales are down due to a worldwide recession. Companies aren't spending money upgrading and replacing PC's. Nothing to do with the iPad. It's easy to point a finger at someone else when it's your own bad planning that landed you in the sh!t.
Let me get this straight. You think PC sales are only down due to the recession? Nothing to do with million of folks saying I'll try out an iPad and screw buying yet another PC that will cost more to fix in a year or so than to replace?
If you are correct then explain why Mac sales are climbing at an unprecedented rate? They sell on another planet where there isn't a recession maybe?
What complete. PC sales are down due to a worldwide recession. Companies aren't spending money upgrading and replacing PC's. Nothing to do with the iPad. It's easy to point a finger at someone else when it's your own bad planning that landed you in the sh!t.
Well aren't you the genius. Thanks for explaining it to us. That recession thing must explain the current explosive growth of the iPad, iPhone and Mac.
That explains why even the el-cheapo computers are coming with 4 Gigs of RAM these days. I've considered going up to 8, but RAM never seems to be a bottleneck for me. I usually have nearly 2 Gigs available.
I have two new MBPs one 4 one 8 gigs there is a hell of a difference to be honest. I am upping the other to 8 asap.
iPad makes billions and the DRAM makers lose billions. I think Gerbil sales are hurting the pet industry. Now how much sense doe that make. Lets blame Apple for making and selling a product that hurts others.
Exactly. It's not as if Steve didn't tell them the PC industry as they knew it was over is it?
I have two new MBPs one 4 one 8 gigs there is a hell of a difference to be honest. I am upping the other to 8 asap.
Yeah? Good to know. I haven't priced sticks of RAM for a while. Last time I did, upgrading to 8 was very tempting. Maybe by now it is a much easier decision.
Apple now ships more iPads than all the PCs Dell sells
That says it all right there. Just a couple of years ago, Apple sold zero iPads. Now it is selling more iPads than all of the PC's that Dell sells. Nobody in the computer industry anticipated the mind blowing and earth shattering effects that the iPad would have.
Memory makers just counted on the same old boring status quo to remain and they kept investing money in new memory plants, dreaming of a world filled with cheap and ugly PC's. Little did they know that one of the fastest selling technology devices in the history of mankind was soon to be unleashed, wreaking havoc, confusion and panic among Apple's competitor's, causing them all to launch into copycat mode. The many tens of millions of people buying iPads means that they are not buying as many other traditional computer devices as they normally would have, had the iPad not existed. The average person, who is not a content creator or a professional who relies on powerful computers, are choosing iPads, because an iPad is all many of them will ever need.
Now is a great to buy RAM since it is so cheap. I've maxed out all of my machines and installed the max RAM in every single one, since it is so cheap to do now.
they cried the foul when DDR2 prices dropped.
ddr3 prices is dropping now too and its now a new excuse. If it wasn't ipads/iphones it wouldt just be something else.
you can find 8GB of DDR3 right now for around 30-40 bucks before rebate from Corsair and others.
Yeah? Good to know. I haven't priced sticks of RAM for a while. Last time I did, upgrading to 8 was very tempting. Maybe by now it is a much easier decision.
You can pick up SODIMMs for less than what it costs you to take your wife out on date night. Seriously. 8 GB goes for like $40 at Fry's.
Sales of Apple's iPad tablet computers are crushing the best laid plans of many chip makers, causing a surplus of memory chips after a massive expansion in DRAM factories were built in anticipation of conventional PC growth.
Best laid plans? Apparently these plans aren't all that good if they weren't dynamic and took into account multiple variables. Anticipation isn't planning. Time to re-think the management team, folks.
And do stop with the "this is all Apple's fault" finger pointing. It's just bait piece reporting.
Yeah? Good to know. I haven't priced sticks of RAM for a while. Last time I did, upgrading to 8 was very tempting. Maybe by now it is a much easier decision.
NewEgg had a special recently that was ludicrously low, can't recall exactly but I almost thought it was a miss print,
You can pick up SODIMMs for less than what it costs you to take your wife out on date night. Seriously. 8 GB goes for like $40 at Fry's.
You haven't met my wife then