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A report by IC insights suggests that the average selling price of DRAM could surge by 40% this year. On the other hand, IDC estimates that PC shipments can shrink by 9.7% in 2014, which can eventually weigh on the sales of DRAM modules for PCs. So, while surging DRAM prices is good news for its manufacturers, slowing PC sales might play spoiler.
However, with the soaring smartphone and tablet shipments, mobile DRAM segment has become a lucrative industry. According to Trefis, mobile DRAM industry can reach up to 26.7% of the entire DRAM market by the fourth quarter of 2013, almost double the 14.1% in the first quarter of 2012. So, DRAM manufacturers operating in the mobile segment will most likely have a great year ahead.
Although this is an industry-wide advantage, Micron's (NASDAQ: MU ) mDRAM segment seems to offer exceptional growth prospects.
It is all over the news. Micron recently completed the acquisition of Elpida Memory, and increased its stake in Rexchip Electronics to 89%. As a result, Micron's overall production capacity has been increased by 45%, which has propelled it to one of the largest DRAM manufacturers by market share.
According to DRAMeXchange, the collective PC-DRAM market share of Micron and Elpida currently aggregates to 28.9%, which is comparable to SK Hynix' 30% and Samsung's 32.7% (NASDAQOTH: SSNLF ) . More importantly, Elpida and Rexchip Electronics have expanded Micron's mobile product portfolio. As a result, Micron and Elpida's collective mDRAM market share stands at around 22.7%, which is a massive increment to Micron's meager individual share of 3.4%.
Samsung and SK Hynix still dominate the mDRAM industry with a 50.3% and 25.7% market share, respectively. However, Micron's acquisitions have positioned it as a formidable competitor in the mDRAM industry, which has become the fastest growing DRAM segment. And Apple's (NASDAQ: AAPL ) huge reliance on Elpida Memory can further accelerate Micron's growth in the mobile segment.
Apple currently uses 80% of Elpida's mDRAM installed capacity to manufacture DRAM modules for its mobile devices, which includes iPads, iPhones, and iPods. Its reliance on Elpida increased soon after the patent infringement lawsuit between Samsung and Apple, soured their business relationship. And since Apple is Elpida's largest client (mDRAM segment), its revenue stream is mostly reliant on Apple's volumetric sales of mobile devices, and its demand for mDRAM modules.
With Samsung's aggressive smartphone launches, Apple has been struggling to even retain its market share lately. So to regain its market position, Apple recently unveiled its iPhone 5s and iPhone 5c smartphones. IHS estimates that iPhone shipments (all versions) can aggregate to 86.1 million in the second half of FY13, which is 25% higher than 68.7 million in the first half, and 15% higher than 61.1 million in the first half of 2012. This implies that Apple will require more mDRAM modules for its iPhones, which can eventually fatten Micron's top-line.
Apart from these sales estimates, there's another glaring positive.
Over the few years, Elpida, Samsung, and SK Hynix have developed the next generation LPDDR3 memory modules, which are up to 60% faster than the current LPDDR2 modules. As the demand for these memory standards is yet to pick up, DRAMeXchange estimates that LPDDR2 modules will account for 70% of the entire mobile DRAM shipments in fiscal 2013.
However, according to IHS, the latest iPhone 5s comes equipped with the latest LPDDR3 modules, while iPhone 5c has LPDDR2 memory. So while other mobile DRAM manufacturers struggle to find prospective buyers of LPDDR3 modules, Micron is already manufacturing these modules in massive quantities.
This would not only help Micron to capture a greater market share, but the mass production of LPDDR3 modules will also diversify Micron's product mix and reduce its operational workload on its LPDDR2 fabrication capacity.
Micron is up to date with the latest memory standards, and has also begun its research work on LPDDR4 memory standards. It is already benefiting from the favorable DRAM pricing, and its recent entry into the mDRAM segment allows Micron to enjoy the best of both worlds (PC and mobile). And with Apple's huge dependence on Elpida, Micron's mDRAM segment seems well poised for growth.
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