Shifting Sands in DRAM Market

By William Trent, CFA of Stock Market Beat

As the companies in the market take different competitive approaches, the market share for producers of the dynamic random access memory, or DRAM, is shifting. DRAM is the primary memory type used in personal computers. According to The Idaho Statesman:

Micron Technology is poised to lose its standing as the world’s fourth-largest producer of  — the primary type of memory using in personal computers.

Micron was barely holding on to the fourth position in the third quarter of this year, according to the latest industry rankings released by iSupply Corp., an El Segundo, Calif., company that provides research and analysis on the semiconductor industry.

The rankings reflect the decision by Micron executives to diversify the company away from producing just DRAM. Micron is focusing growth on other memory products like portable flash memory and products like image sensors used in digital cameras and cell phones.

Samsung, however, is taking a different strategy. The company told investors recently it planned to increase its DRAM production in 2007 by 90 percent in hopes of reaching its goal of controlling up to 40 percent of the market.

Some analysts criticized Micron for moving away from DRAM at a time when prices for the memory, which is primarily used in personal computers, was at record levels. But Micron officials have long maintained that diversifying the product base will better insulate the company from the often wild shifts in DRAM prices.

According to the article, the top 10 producers of DRAM control nearly 99 percent of all production. The companies with the highest market share during the third quarter of 2006 are:

• Samsung, 27.8 percent

• Qimonda, 16.9 percent

• Hynix, 15.8 percent

• Micron, 10.6 percent

• Elpida, 10.2 percent

• Nanya, 6.6 percent

• Powerchip, 4.8 percent

• ProMos, 4.5 percent

• Etron, 0.9 percent

• Winbond, 0.6 percent

Source: iSupply

Such market share tables can be a handy reference for investors new to an industry group. They can then track the company’s relative sales growth in that product line in order to see who is winning or losing share.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.

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