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INTRODUCTION
VERTICAL MARKET OVER INDEPENDENCE?
Japan has traditionally dominated the computer memory chip market. Japan's
multi-nationals¾Fujitsu, Hitachi, Nippon Electric Corp (NEC), Mitsubishi,
Sharp, and Toshiba¾have for the most part controlled the production and
supply of memory chips. However, the major focus for Japan's multinationals
hasn't been on either memory chips or semiconductors. The majority of revenue
for these companies has come from the production of computers, computer
peripherals, telecommunications equipment, and consumer electronic systems.
Semiconductor and memory chip production has been part of a vertical integration
strategy for Japan. The majority of memory chips produced by these companies
have ended up in the electronic systems they produce. In the past, this strategy
provided a consistent supply of memory chips at low prices. This permitted Japan
to offer low-priced consumer electronics and to capture the largest share of the
worldwide consumer electronics market. Furthermore, the Japanese have been able
to make a profit on their computer memory chips by selling excess production on
the world market.
This vertical integration strategy in a more globalized economy has not been
successful in recent years. As competitors from Korea and Taiwan have increased
market share and capital investment costs for the production of memory chips,
the price of computer memory has gyrated. Therefore, it has been less expensive
for Japan's electronics companies to purchase computer memory chips from outside
vendors rather than from their own internal operations. This has resulted in
significant losses for Japan's memory chip operations. In response, Japan's
memory chip and consumer electronic markets have restructured. Taiwan now
manufactures a large percentage of Japan's commodity memory chips such as DRAMs
and ROMs. In 2002 Japan has refocused its development efforts on advanced memory
chip technology and the production of higher margin chips such as flash memory
chips and embedded memory for system-on-a-chip products.
For the most part, American companies abandoned the DRAM memory market.
Micron Technology is now the only major American manufacturer in the DRAM
market. IBM and Texas Instruments both left the mainstream DRAM market to focus
on products with more market stability. Advanced Micro Devices, another American
company, competes in the nonvolatile flash memory market through its joint
venture manufacturing facility, Fujitsu AMD Semiconductor Ltd. (FASL). European
companies such as STMicroelectronics have remained in the flash memory market,
but like Texas Instruments they abandoned DRAM operations. Infineon Technologies
is the last major European manufacturer that competes with Asia for a share of
the DRAM market.
Unlike most European and American memory chip companies, Japanese memory
companies were vertically integrated into their parent's consumer electronics
operations. Japan's memory companies are part of multi-conglomerates that have
major operations in other areas of the electronics market: PCs, digital cameras,
supercomputers, automobiles, telecommunications and wireless phones. Because of
this, Japan's memory companies were guaranteed their parent company as a primary
customer. Korea's Samsung memory chip operations are also part of a
multi-conglomerate, and like the Japanese, they offer a multitude of varied
products. Samsung, the world's leader in memory chip sales, has operations in
cellular phones, PCs, set-top boxes and televisions.
It can be concluded that Japan initially had an advantage in the memory chip
market. This was because Japan's computer memory chip companies had their parent
companies as guaranteed customers and as providers of the large amounts of
capital needed to build computer memory chip factories. Furthermore, Japan could
produce lower cost consumer electronic systems because they could obtain
computer memory chips at a lower cost from their own computer memory chip
operations. This situation, however, worked against them when more competitors
entered the market and when the computer memory markets suffered downturns.
During these times, the price of obtaining computer memory chips on the open
market was less than the cost of obtaining computer memory from their own
computer memory chip factories. This not only resulted in losses from Japan's
computer memory operations, but also Japan was not able to compete effectively
in its traditional lead market-consumer electronics.
The question facing Japan was: It is more effective for computer memory chip
companies to compete as part of conglomerates or as sole entities?. From
business developments in the memory chip market, the industry has concluded that
an independent memory chip company is the better strategy. Computer memory chip
companies as independent companies have more flexibility. For example,
independent memory chip companies can form joint ventures with other computer
memory chip companies, which gives them access to the large amounts of capital
needed to build state of the art chip factories and low cost chips. This also
frees their parent companies from devoting large amounts of capital away from
their primary operations.
But is the pendulum about to swing back again? New developments in chip
manufacturing suggest that Japan has reduced the initial capital investment for
the production of memory chips. Recent developments at Trecenti Technologies,
the joint venture between Hitachi and United Microelectronics (of Taiwan), may
prove the beginning of a trend. In February 2002, Hitachi purchased United
Microelectronics' interest in the venture and is now the sole investor. Trecenti
was formed in March 2000 as Japan's first 12-inch wafer fabrication facility for
the mass production of memory and advanced system-on-a-chip products.
EMERGING TECHNOLOGIES
Below are the emerging memory technologies:
- Embedded Memory
- CAM
- Ferroelectric RAM (FERAM)
- High Density Memory
- Magnetoresistive RAM (MRAM)
- Multichip Stacked Packaged Memory
- PSRAM
Magnetoresistive RAM is expected to replace flash nonvolatile technology in
the long term. By 2004 if not sooner, flash memory chips will face increased
competition from ferroelectric memory for cellular phone applications. In 2002,
PSRAM (an embedded DRAM technology) will replace SRAM chips for cellular phone
applications. By 2004, PSRAM also will be replaced with both ferroelectric and
magnetoresistive RAM.
Embedded memory technology remains an impediment to the growth of low-density
discrete memory chips. This is because logic chips can now incorporate memory
blocks in the megabits range. Microprocessor manufacturers, such as Intel, have
developed microprocessors that have 2 Mbytes of SRAM memory within the
microprocessors. This has resulted in the market for discrete SRAM chips for
motherboard applications virtually disappearing and the average selling price of
advanced microprocessors increasing.
Stacked package memory, where multiple types of memory die are bonded
together and stacked vertically on top of each other, is another market that
will grow fast in 2002. This is because of the reduced board surface area
requirements needed with stacked technology. Stacked package memory will become
one of the primary types of memory chips for portable applications such as
cellular phones and laptops.
Content Addressable Memory (CAM) has emerged because it can now be produced
at cost levels that are manageable for high-end applications. The technology,
which is especially suited for network equipment, also offers promise in
traditional applications such as PCs.
STUDY GOAL AND OBJECTIVES
This report has market, technical and business objectives. The market
objective is to breakdown worldwide semiconductor memory product and company
market shares, determine specific growth segments of the computer memory market,
pinpoint potential new computer memory technology market application areas,
evaluate companies that have valuable technology portfolios and examine
competitive factors that the computer memory industry must face.
REASONS FOR DOING THE STUDY
This study has been undertaken for several reasons. One is to determine the
important trends and directions in the worldwide computer memory market. This
includes both technology and business trends. Another reason for this study is
to provide a business model to analyze the supply and demand for memory chips,
which is important to both producers and purchasers of computer memory chips.
Producers, in order to maximize profits and minimize losses, must plan their
capital investments such that they correspond to worldwide memory chip supply
and demand cycles. Buyers must also plan their purchases such that they minimize
excess inventory and have ample supplies to meet demand for their end products.
Another reason for this report is to determine both present and future
applications for computer memory. Applications are one of the primary growth
forces in the computer memory market. Personal computers have been the
traditional growth force in the memory market, but new products such as cellular
phones and digital cameras have allowed the computer memory market to further
sustain itself. Future applications will be vital to both growth and
profitability of the memory chip market. Without new memory chip applications,
memory chip companies will not be able to grow and advance the technology.
The final reason for this report is to determine the effects new computer
memory technology will have on the industry. In this regard, this study examines
recent computer memory technology developments and compares and evaluates the
technology for future mass production.
CONTRIBUTIONS OF THE STUDY AND FOR WHOM
This study makes several important contributions. These include a methodology
to determine computer memory supply and demand. In this regard, the report
breaks down the various application end-user segments that contribute to demand.
The report also breaks down the production capacity base of memory chip
companies. A production capacity formula is presented that allows calculation of
memory chip production capacity based on the feature length of the manufacturing
process, wafer size and the number of wafers produced per month. The report also
contributes technologically. It does so by explaining the basic technological
and manufacturing components of computer memory. Furthermore the report examines
technology that has the potential to significantly reduce the costs and improve
the performance of electronic systems that utilize computer memory.
The audience for this report includes professionals who must have extensive
business and technology information about computer memory. This includes
professionals from most segments of the electronics industry. Specifically, cost
and technology driven companies such as PC, digital camera, cellular phone and
electronics contract manufacturers should study this report. Advances in memory
technology and developments in memory market are expected to have a profound
influence on both PC and cellular phone companies operations.
The report is also important for companies that are involved in the
semiconductor market. This would include chip manufacturers, fabless
semiconductor companies, design houses, semiconductor packaging and assemble
companies, and semiconductor equipment manufacturers. Disk drive, smart and
memory card, module companies, and producers of memory subsystems also will
benefit from the report.
The report is important for a wide variety of personnel involved in the
electronic industry segments, including product development managers, investment
analysts, venture capitalists, integrated circuit design team managers,
operations managers, buyers, managers of R&D departments involved with the
design of integrated circuits, CEOs and CFOs of both large and start-up design
companies and those that create and sell computer memory design. Newly formed
computer memory companies should have an interest in this report, as should
distributors of computer memory.
SCOPE AND FORMAT
This report provides a detailed analysis of worldwide market and technology
issues associated with the computer memory industry. Additionally, it provides
pivotal information needed for objective investment analysis, the selection of
computer memory and the acquisition of computer memory companies.
The report's primary focus is on companies that produce memory integrated
circuits. The report also includes secondary information on companies that offer
technology that competes with memory integrated circuits.
Comprehensive business information and analysis are also included. There is a
breakdown of industry sales by company and product types as well as 5-year
forecasts for computer memory by product type. In order to substantiate the
report's conclusions, the report examines the historical financial data, venture
capital funding, acquisitions, technological trends, license agreements, and
distribution agreements. Also this report substantiates its conclusions through
the examination of computer memory products and associated patents all with
respect to the market and sales capabilities of the computer memory companies.
Computer memory chip companies are divided into four different industry
categories: Tier one IDMs, Tier two IDMs, Fabless companies, and IP companies.
Tier one integrated device manufacturers (IDMs) have wafer fabrication
manufacturing capabilities and annual memory chip revenues over $1 billion.
Tier-two IDMs with revenues between $100 million and $1 billion are also
covered. Memory chip companies without manufacturing capabilities-known as
fabless companies-are also included. Fabless companies design and market memory
chips and outsource the manufacture of their memory chips. Finally, Intellectual
Property (IP) companies license partial or complete memory chip designs to
fabless companies and IDMs.
In addition to this tier approach, the report also breaks down the market by
product type. The report classifies computer memory market into three main
types: nonvolatile, volatile and specialty. The main memory types are further
sub-classified into the different market product subcategories. Specific memory
chip product sub-segments include CAM, DRAM, EEPROM, embedded DRAM, embedded
FLASH, EPROM, ferroelectric, FLASH (Both NAND and NOR), PSRAM, ROM, SRAM and
Multichip Packaged Chips (MCP). Other sub-classifications include high speed,
low power mobile, and high- and low-density memory chips from 1-Gbit down to
1-Kbit.
The report's primary focus is on the two memory chip categories that hold the
majority market share: FLASH chips and DRAM chips. The other memory chip
categories are broken down in less precise terms, which was due to limitations
on the report's size. Therefore trade-offs on coverage were made. Although these
segments of the memory chip market have been abbreviated, the salient points
regarding the understanding of these markets, the trends within these markets,
and their relevance to the other memory chip market segments are explored. PSRAM
and CAMs are not usually classified as traditional memory chips, but embedded
ones. They are covered with regard to their effect on the other segments of the
memory chip market. (CAMs are also classified as network coprocessor chips.)
Embedded memory is covered along with CAMs in the Specialty section of this
report. PROM, a near non-existent segment of the memory market is not covered.
FIFOs, which have been classified as a logic part as well as a memory chip, are
mentioned briefly.
The report also includes extensive business reference information including
an address book with worldwide headquarters sites and company contacts.
METHODOLOGY AND INFORMATION SOURCES
The report follows standard research methodology. For this report over 200
companies and 200 different computer memory chip products were reviewed.
Information sources for the report include standard company literature, annual,
10K and quarterly reports for public computer memory companies, a compendium of
conference papers related to the computer memory market and trade press journals
covering the computer memory market. Additionally, several important patents
were reviewed in terms of their relevance to product and industry developments.
To determine computer memory chip sales, numerous end markets that computer
memory chips are used in were analyzed. The aggregate amount of computer memory
used in each end market was determined. Computer memory revenue from each end
market was then calculated with these aggregate sums and the average selling
price of the specific type of computer memory used. Computer memory sales
projections for each type of computer memory chip were then determined by
projecting the growth of the applications markets.
Where precise company product sales information is not available, the
estimated product sales and company sales are determined from a plurality of
business and product data. This data is correlated against a business model that
is based on a statistical average. Specific data factored in includes:
- Acquisitions history
- Average product selling price
- Customer base
- End market applications
- Facilities size, distribution and sales
network
- Import and export data
- Manufacturing capacity
- Marketing expenditures
- Number of employees in a specific unit
- Number of products
- Overall market growth rate
- Product acceptance in the market place
- R&D expenditures
- Total available market size
- Trade statistics
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