According to Avril Wu, senior research director of DRAMeXchange, most PC-OEMs have concluded negotiating their procurement contracts for 2Q18. The average quote of mainstream PC DRAM modules from the first-tier DRAM suppliers came to US$34 this April, showing a 3% increase from the average price in 1Q18. From the perspective of the market, DRAM suppliers have kept a greater share of their capacity for server memory products, which are generally seeing greater demand, higher gross margins, and higher profitability. Furthermore, first-tier DRAM suppliers will gradually start using their expanded capacity later, toward the end of 2018. Hence, prices of PC DRAM products will stay on an uptrend in 2Q18.

Revenue-wise, Samsung was firmly the leader in the industry, with a new record high set. Specifically, Samsung’s 1Q18 revenue rose by 2.9% QoQ to US$10.36 billion. SK Hynix’s revenue from the same period also advanced by 2.2% QoQ to US$6.43 billion. Product shipments from the top two South Korean suppliers slipped a bit in 1Q18 because of the weak smartphone market. Consequently, their combined global market share in revenue terms also decreased slightly from the prior quarter to around 73% in 1Q18. Respectively, Samsung’s market share came to 44.9%, while SK Hynix’s was 27.9%.

Micron remained third place in the revenue ranking but has been the price leader so far in 1H18 as the company is keen on raising quotes. Compared with Samsung and SK Hynix, Micron’s price hikes were noticeably larger in 1Q18, surpassing 10% QoQ on average. As a result, Micron’s 1Q18 revenue reached US$5.21 billion, up by 14.3% QoQ. Micron also expanded its market share by two percentage points from the prior quarter to 22.6%.

Regarding the operating margins of the top three suppliers, Samsung again broke its previous record in 1Q18. Samsung’s operating margin grew significantly from 64% in 4Q17 to 69% in 1Q18. SK Hynix, too, expanded its operating margin from 59% in 4Q17 to 61% in 1Q18. Both the top two South Korean suppliers have pushed their respective operating margins over the 60% level. Micron’s operating margin in 1Q18 came to 58%, which was also a marked increase from the 53% of 4Q17.

Going forward, the general price increase and the cost improvements in connection with technological advances are expected to keep driving profit for the top three suppliers and take their operating margins to new highs in 2Q18. However, the profitability of the top suppliers is also far exceeding the buyers’ acceptable limit. For example, Samsung’s operating margin in 1Q18 translates to a gross margin surpassing 80%. This implies that the hikes in quotes will likely start to moderate.

With respect to the technological development, Samsung is consistent with its objective of maintaining its 18nm output share at 50-60%. The DRAM line on the second floor of Samsung’s Pyeongtaek plant is being readied for production and will represent the company’s transition to its next-generation 16nm process. SK Hynix is currently focus on raising the yield rate of its 18nm process that entered production at the end of last year.

Nevertheless, the supplier is finding that the transition to the next-generation 1X nm processing is more difficult than anticipated. SK Hynix is sticking to the same capacity expansion plan, so its second fab in Wuxi is on track to finish construction at the end of 2018 and will be in operation in 1H19 at the earliest. As for Micron, its subsidiary Micron Memory Taiwan (formerly Rexchip) is now totally producing on the 17nm process. The other subsidiary Micron Technology Taiwan (formerly Inotera) has begun the migration from the 20nm to the 17nm in 2Q18 and will gradually ramp up the 17nm production in 2H18.

The latest survey of Taiwan-based suppliers finds that Nanya saw a substantial increase in its DRAM revenue in 1Q18, up by 15.1% QoQ. Nanya’s strong performance was mainly attributed to the bit supply growth and cost reduction resulting from the migration to the 20nm process, which contributed to an increase of five percentage points in operating margin from the prior quarter to 44.3% in 1Q18. Nanya’s profit will keep going up as the company improves the yield rate of its 20nm process and optimizes its product mix.

Powerchip’s 1Q18 DRAM revenue rose by 8.2% QoQ as the company has also raised its quotes. Additionally, Powerchip continues to see growth in its foundry business that serves IC design houses such as ESMT and AP Memory. Winbond’s DRAM revenue rose slightly in 1Q18 by just 1.2% QoQ. Winbond registered flat growth because the price hikes of its specialty DRAM products were relatively small.