Posted : 2009-07-26 18:49
Updated : 2009-07-26 18:49

Chipmakers Focusing on Speedier DDR3 Chips

Samsung’s 2Gb DDR3 chip
By Kim Yoo-chul
Staff Reporter

The worst may be over for Samsung Electronics and Hynix Semiconductor in chips considering their quarterly performances.

Now the world's two biggest memory chipmakers are paying keen attention to churn out speedier and more energy-efficient chips in a bid to eat up more shares in the next-generation computer chip market.

Robert Yi, chief of the investor relations team at Samsung, and Hynix CEO Kim Jong-kap agreed on the view that the rising demand for the next-generation DRAM chips will help them boost their profits for the second half.

Samsung plans to spend 70 percent of its total chip investment projected in the second half to sharpen the next DRAM chips, while Hynix will use a great portion of its second half's 800-billion-won investment budget for the chips, industry sources said.

The South Korean chip duo is betting heavily on the advanced DRAM chips at a time when most computer chipmakers are still suffering from losses hit by a supply glut of DDR2 chips ― the predecessor of DDR3.

DDR3 DRAM chips have strength in power consumption and enhanced functionalities.

Moving faster to DDR3 chips will help chipmakers charge higher prices, with DDR3 chips expected to become the mainstream memory chip used in PCs by early next year, analysts say.

Samsung and Hynix are the only mass producers of DDR3 chips as they have technology capabilities for a faster and smoother transition in chipmaking.

Smaller makers ― which had been mired in serious money-making difficulties with DDR2 amid the supply glut since last year, driving the price of DDR2 chips below the cost of producing them ― are still busy mobilizing money to boost their capital investments.

"Samsung Electronics is getting more calls to supply more DDR3 chips to major PC makers such as Dell and Hewlett-Packard (HP) of the United States. The portion of DDR3 chips will reach some 40 percent of the total DRAM production by the end of this year," a high-ranking Samsung source said.

Samsung just began shipping 2Gb DDR3 memory chips that use 40-nanometer-class processing technology from early this month. Hynix plans to apply the 40-nanometer level technology in making DDR3 chips this year.

Producing a chip using 40-nanometer technology could create more power and save manufacturing costs by over 30 percent than chips using 68- to 70-nanometer process technology.

"With Dell, HP and Apple, Hynix is in talks with several other PC makers to supply more DDR3 chips," a high-ranking Hynix source said.

Last week, Hynix CEO Kim Jong-kap said his company is forecast to turn around in profits on a quarterly basis in the third quarter, which has been in line with the market expectation thanks to stabilizing chip prices and the rising shipments of advanced DRAM chips.

Hynix said DDR3 chips will represent about 50 percent of the company's total PC-use DRAM production by the end of this year from about 20 percent.

Usually, when chipmakers produce a new advanced memory chip, manufacturing costs go up in the early stages. But as they start to ramp up production on more advanced technology, the cost per chip falls.

"When the DDR3 market reaches an economy of scale, then the biggest beneficiaries would be Samsung and Hynix," an analyst at Meritz Securities said.

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