Here's Why Mobile DRAM Industry Is Poised to Pop

Mobile DRAM memory standards are evolving fast. Leading memory module manufacturers, namely Samsung (NASDAQOTH: SSNLF  ) , SK Hynix, and Micron (NASDAQ: MU  ) , have begun sampling their next-generation LPDDR4 modules before full-fledged roll-out. In addition, LPDDR2 memory is being gradually replaced by its successor, LPDDR3. What should be your next move? Let's find out.

Understanding technical jargon
Mobile devices like ultrabooks, smartphones, and tablets are equipped with low-power DDR memory, or LPDDR, to minimize overall power consumption. Compared to their desktop counterparts, mobile memory modules are designed to operate on relatively lower voltages and generate less heat.

Currently, most budget mobile devices are equipped with LPDDR2 memory, while premium smart devices like Apple's (NASDAQ: AAPL  ) iPhone 5s are equipped with LPDDR3 memory, which is approximately 60% faster than LPDDR2 memory. Though that's a fantastic performance boost, there are some shortcomings as well. Only high-density LPDDR3 modules, which generally have higher fabrication costs, have the bandwidth to execute memory-intensive tasks like 4k rendering.

To meet the rising demand for memory bandwidth while keeping fabrication costs in check, Samsung developed the world's first 1GB LPDDR4 memory last month. Compared to the fastest LPDDR3 memory modules, its LPDDR4 module is supposed to be 50% faster and consume 40% less power. Shortly after this launch, Micron and SK Hynix also unveiled their respective LPDDR4 memory modules.

What's the future of LPDDR?
In a research note issued last month, TrendForce noted that the LPDDR3 memory standard will become mainstream in 2014 and ultimately replace the current LPDDR2 standard. The research firm, however, noted that LPDDR5 modules will be manufactured in limited quantities during 2014 and will not go mainstream until 2015.

The increasing number of LPDDR3-equipped mobile devices will compel Apple and Samsung to equip their respective flagship smartphones and tablets with the latest LPDDR4 modules. This will enable them to deliver an un-rivaled user experience and eventually separate their flagship devices from the crowd. 

Investors should also note that Intel's upcoming Broadwell platform is expected to support LPDDR4 memory standards and, consequently, Samsung and Apple might want to equip their ultrabooks and laptops with LPDDR4 memory modules. Altogether, these factors suggest that the demand for DRAM modules will continue to grow in 2014 as well. But, which DRAM manufacturer should you pick? 

Picking a pure-play
Being a pure-play memory module manufacturer, Micron's financial performance is directly correlated with its DRAM module sales. The company acquired Elpida Memory last year, which in turn expanded Micron's DRAM production capacity by almost 45%.

In addition, Elpida Memory expanded Micron's mobile DRAM product portfolio and brought valuable clients like Apple along, thus positioning it as a formidable competitor in the mobile DRAM industry. As Trefis noted, the inclusion of Elpida's earnings boosted Micron's quarterly DRAM earnings by 69%, sequentially.

 

Micron

Samsung

SK Hynix

DRAM Market Share

27.8%

36.8%

27.4%

Speaking of its operations, Micron's president recently noted, "We are the first supplier to sample low-power DDR4 to our customers and chipset partners. This allows them to debug their next-generation systems and reference platforms with Micron solutions." So, with valuable clients like Apple and a technological head start, Micron seems particularly well-positioned to yield handsome returns over the coming year.

Final thoughts
The DRAM industry is booming and Micron stands to benefit greatly. But, as described in my previous article, rising DRAM supply from SK Hynix and Samsung can put short-term pressure on DRAM prices. So, investors also need to understand the risks involved with investing in Micron.

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