Samsung Investing In 40nm DRAM Technology
In many ways, this is business as usual. If you've ever followed the adoption of a memory standard, you've seen how the product changes as costs drop and companies improve their manufacturing techniques. RAM densities that once required two full banks shrink to just one side of the board, introductory voltages drop, and motherboard compatibility improves. In this case, Samsung isn't just investing money into DRAM manufacturing during an economic downturn, they're investing at a time when the DRAM industry is taking the pounding of its life. At present, the DRAM industry is overbuilt and under-margin, with chips selling for less than their cost of production. The major DRAM manufacturers have lost some 17 billion or more (the number keeps rising) in the past 18 months; losses in the first quarter alone topped one billion dollars. Multiple manufacturers are betting increased demand for DDR3 will allow them to raise prices, with one estimate projecting a 30 percent rise by the end of the year. Whether that estimate is based in anything more than wishful thinking, however, is very much open to debate.
Yes, these are maximum values and you can be sure Dell is packing away a hefty chunk of that profit, but it's easy to see how the DRAM industry depends heavily on product sales at the upper end of the PC market Worse, the consumer-oriented portables that are driving sales right now typically pack just 512MB-1GB of 400-533MHz DDR2. There's literally no profit in those chips. Samsung is obviously betting that the PC industry will embrace DDR3, and there's no doubt that sales will jump once Intel's mainstream Core i5 platform launches. Nonetheless, this is something of a gambit as far as the DRAM industry is concerned—it wouldn't be surprising if Samsung wound up focusing more on 40nm Flash and less on memory.