RAM makers lose billions as iPad challenges traditional PCs

“Apple Inc.’s iPad is the bane of computer-memory makers, worsening the industry’s losses as consumers choose the hand-held device that uses about 75 percent fewer of the chips than a typical laptop,” Tim Culpan and Jun Yang report for Bloomberg.

“Elpida Memory Inc. (6665), Hynix Semiconductor Inc. and other makers of dynamic random-access memory, the most common chip in computers, lost a combined $14 billion in the past three years, according to Bloomberg calculations,” Culpan and Yang report. “That comes after the $37 billion that researcher DRAMeXchange estimates they spent building factories in a bet on continued growth in the industry.”

MacDailyNews Take: Bad bets are not Apple’s fault.

Culpan and Yang report, “DRAM prices plunged to a record low this month after PC shipments missed analyst forecasts and iPad sales reached a record 11.1 million. ‘DRAM makers invested too much, and they bet heavily that growth of the computer industry would always continue,’ said Chen Liway, an industry analyst at Polaris Securities Co. in Taipei. ‘That would have been OK if the iPad had never come along.'”

MacDailyNews Take: Change happens.

“PC shipments climbed 3.2 percent to 92 million units, compared with an earlier projection for 5.1 percent growth, Stamford, Connecticut-based Gartner said. iPad sales in the same period exceeded computer shipments by Dell Inc. (DELL), the world’s No. 3 seller,” Culpan and Yang report. “Apple has sold about 40 million iPads since the product’s debut last year, generating $25.3 billion in revenue. Apple may sell a record 20 million iPads globally during the holiday quarter, according to Forrester Research Inc. (FORR) in Cambridge, Massachusetts.”

Culpan and Yang report, “Elpida and other DRAM makers bet that new versions of Microsoft Corp.’s Windows and a stable global economy would drive demand for their chips. Instead, Windows sales fell…”

MacDailyNews Take: All cheer the end of Microsoft’s Dark Age of Personal Computing!

“Manufacturers like Elpida, which spent $3.8 billion on factories in the past four years, must keep churning out chips to generate enough cash to cover debt payments, pushing prices down even further,” Culpan and Yang report. “‘Elpida is using the state-of-the-art production technology, yet the finished products are sold for half the price of a rice ball,’ Yukio Sakamoto, chief executive officer of the Tokyo-based company, told investors last month.”

MacDailyNews Take: Leadership without vision equals failure.

Culpan and Yang report, “Suwon, South Korea-based Samsung, the world’s biggest semiconductor maker, will post 2.3 trillion won ($1.98 billion) profit from DRAM this year, according to Shinhan Investment Corp. in Seoul. That’s because Samsung sells twice as many specialty DRAM chips, where margins are higher, as commoditized chips used in PCs, Shinhan said in an Oct. 25 report. The company also supplies up to 64 gigabytes of NAND flash memory for every iPad, compared with about half a gigabyte of DRAM. Demand for NAND flash — which saves photos, videos and software permanently — will climb 49 percent in the five years to 2015 while the DRAM market will be little changed, according to iSuppli.”

MacDailyNews Take: Samsung deserves credit for anticipating future trends almost as much as they deserve the complete and immediate cancellation of Apple orders due to their serial, slavish copying of Apple’s products.

Culpan and Yang report, “Icheon, South Korea-based Hynix, the second-largest DRAM supplier, and Boise, Idaho-based Micron Technology Inc., the fourth-largest, also are increasing supply of NAND flash, helping both companies return to profitability last year after losses the two previous years… Elpida is following a similar path, spending the last two years developing versions of DRAM used in smartphones that it expects to ship to clients next quarter, Sakamoto told investors last month.”

Read more in the full article here.

MacDailyNews Take: Buggy whip and typewriter makers didn’t much like cars and computers, either. Change or die. There should be no remorse for lazy companies that fail to prepare for the future.

20 Comments

  1. Blaming iPads for RAM manufacturers over stretching themselves is unbelievable. The article itself states that the computer industry continues to grow. Could it be the general economy that’s having an effect?

  2. You mean to tell me that 45 million iPads sold a year can have a deleterious effect on RAM manufacturers’ margins such that a potential profit is converted into $14 billion of losses?

    So they make $310 in profits per netbook sale that was lost due to the surge in iPad sales? I don’t think the figures add up. People aren’t buying netbooks because they’re too crippled for what they’re supposed to do with an Arom CPU and people just aren’t buying them any more, opting instead for sleek ultra books like the MBA.

    The iPad to me is a consumption device. Nice if you have spare change to buy but not essential for work. The laptop is still the workhorse for real work.

    1. What I find interesting is that whenever you see the “can’t do REAL work” charge thown at the iPad, the commenter usually only refers to his/her often very limited set of use cases for real work (word processing, spreadsheets, etc.)

      Yet when you look at businesses and people that are turning to the iPad, they’re often using it for a far, far wider set of use cases, well beyond word processing and spreadsheets.

      Typically I read that as a fatal sampling error on the part of the commenter (failure to think outside of a very narrow box). But it doesn’t matter — it’s the real world use of the device that counts at the end of the day.

    2. You’re right. Those 45 million iPads are really nothing to worry about. Those DRAM companies only have to hold on for a bit longer until the iPad fad dies out completely. From some of the comments I’ve read is that you really can’t do anything with an iPad. It’s basically used to carry around for show. How can an oversized iPod Touch possibly cause problems for netbooks and notebooks running Microsoft Windows that are capable of doing everything a full-blown desktop can do.

      The DRAM companies can’t possibly blame the iPad for disrupting their industry when hardly anyone is buying iPads. There are analysts already saying that iPad sales are slowing to a standstill and that everyone that wanted an iPad already has one. It already appears that by early next year, consumers will be throwing away their iPads to get the latest Atom processor notebooks from Asus, Acer, Lenovo and H-P. They’ll be cheap and plentiful and what consumer could resist such a deal. ARM is done for. Intel is ready to rise like a Phoenix from the ashes.

      Apple is not disrupting anything. Toys have absoluely no impact on the real world of computing. It’s the economy that’s to blame. Wall Street is betting that Apple and the iPad will follow the same path that Steve Jobs did for tricking consumers into purchasing useless devices.

      1. This is satire, right? Because if it isn’t, yours is one of the worse cases of cranio-rectal inversion I’ve come across.

        If it is satire, then you are Zung Tang and I claim my five dollars!

        =:~)

  3. > The company [Samsung] also supplies up to 64 gigabytes of NAND flash memory for every iPad…

    Yet another key component of iPad (and probably iPhone and iPod touch) that is supplied by Samsung, in addition to the most important component of all, the A4 or A5 CPU. And I’m sure there are many other Samsung components in there.

    > Samsung deserves credit for anticipating future trends almost as much as they deserve the complete and immediate cancellation of Apple orders due to their serial, slavish copying of Apple’s products.

    Buying an iPhone or iPad is the same as buying a collection of Samsung parts. Maybe Apple can use another fabricator to produce future “A” chips, but it’s not like Apple can go elsewhere to buy NAND flash memory in the volume Apple needs.

    1. Did you read the last part of the article which stated that all the other major DRAM mfgrs are converting to NAND flash? That means that Apple will no longer have to rely on Samsung for so many parts.

      1. Part of Apple’s strategy against the competition is to buy (“pre-buy”) in volume to get the lowest possible price, and if possible, make the component scarce and more expensive for the competition. You can’t do that if you intentionally leave out the largest supplier of the component from the list of potential suppliers.

        So, no… Apple and Samsung are “partners” in iPhone/iPad production for a LONG time to come.

  4. “Samsung deserves credit for anticipating future trends ”

    Samsung didn’t anticipate anything. Apple bought an equity shaken in Samsung several years ago (IIRC 4% of Company), the money being used to finance construction on a new flat panel factory.

    Since then, Apple contracted with, and bought the equipment for Samsung to produce panels, processors and NAND memory to Apple’s specs.

    Apple saw the future, and Samsung came along for the ride.

  5. Wow, it IS pretty cheap right now. I see that OWC has 16GB (4x4GB) kits to max out the current iMac for $98. That’s a lot of RAM.

    Almost makes me want to replace my old iMac (that’s working perfectly)… 🙂

  6. If you think this is bad, wait until Apple starts sticking SSDs in Macbook Pros and Minis. Seagate and Western Digital are gonna be hurtin’ for certain.

    @WiseInvestor – you sound like someone who got stuck in some kind of pundit time warp. Apple will sell 20M iPads this quarter alone, and if they don’t it will only be because Kindles and Nooks let folks read and shop on the cheap. The fact is, most don’t require the computing power of a laptop for their routine daily activities – they’re e-mailing and surfing mostly. And the huge selection of apps means that for most other things they want to do someone has written an app to help them do it. There have always been cheap and plentiful alternatives to Apple products, which has done nothing to prevent consumers from buying millions and millions of them.

Leave a Reply to incredulous Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.