This essay is a (or should we say, 'another'), discussion of important factors which enable some memory makers to survive while some are forced to withdraw, merge or disappear. It also strikes at the general naviete of calling our beloved 'memory segment' a part of 'the technology sector', when, in times like these, technical prowess plays a distant second, or third role is the quest for survival and success. Ultimately, technology is secondary to timely management right-decision-making, to product portfolio and positioning, to investment and mis-investment, to having a banker's prudence, and to having 'friends in high places', who can keep you on life support until a better day. Companies who considered themselves live-or-die-standalone businesses have mostly died; those who considered themselves de facto arms of government or larger business entities, or parts of 'banking groups', are still around...not well, but not dead, either.

Consolidation is nice, but..: Everyone calls for 'industry consolidation', but no one can describe exactly how it happens, and every instance is different from every other one. Even attempts to orchestrate mergers run into resistance. Creditors who have much to gain by tough and realistic decisions to foreclose enterprises, remain passive. Gaining consensus among all interested parties is nearly impossible, so long as anyone has any leverage...and everyone has enough to stall decisiveness and tough choices.

It is rarely a matter of two companies waking up one day and saying, "Today I will merge with so-and-so." Independence dies hard, as we have seen in the nearly-a-year-long shotgun (or BB gun, in this case) consolidation that has so far failed to combine ANY of Taiwan's four DRAM makers (or six, if Inotera and Rexchip are counted...or 10, if one includes Taiwan's technology partners Elpida, Hynix, Micron, and Qimonda). While partnerships have been made and other alliances have been broken, precious little 'consolidation' (and those only piecemeal and ragtag) have happened in ways that improve the industry’s efficiency and the survivability of its players.

The foremost two casualties of the present memory downturn who, so far, appear to have taken the biggest hits, are NOR/NVM maker Spansion, and the residual of Siemens-Infineon's memory group, Qimonda. Both have market and technical roots that are decades old...Spansion was a "Junior Intel" in EPROMs as long ago as the mid-1970s, as they were in Fast SRAMs and MPUs. Siemens, almost always a solitary outpost for EuroDRAMs, put its DRAM stake in the ground about the same time. So, it's been 30+ years for each of them. Each has had ups and down over the long haul and many 'cycles', but neither Qimonda nor its predecessors when it was a part of Siemens or Infineon, was ever the market leader that Spansion was, in NOR flash, until it finally cried "Uncle" for protection from its creditors. Indeed, it was not until the mid-1990s that Infineon showed its independence and original contributions in DRAM technology, until then relying mostly on licensed designs and technologies from Toshiba, IBM and Mitsubishi.

In 2007, before the memory downturn grabbed hold, Spansion was a $2.5B NOR flash player, and top of the game in the wireless space, with more than 35% share of the NOR flash market. Qimonda was the #3 DRAM maker, with revenues of more than $4.1B., with more than 14% of the DRAM market and a strong G-DRAM market position.

What counts, or seems to count, in today's market: Whatever their market standing, however, they have both been remarkable assemblages of technical talent in a world that is steadily moving to one of "Right Management Makes Right", easy access to friendly capital, and little mistakes with big consequences. Taking one's eye off the ball for so much as a few minutes can spell disaster...and in this business, many lethal balls are in the air, in surprising places, at all times. Still, that Powerchip and ProMOS, or even Hynix...each with far less technical talent that Qimonda and Spansion (IMHO)...can out-survive these companies tells us something about what it takes to stay alive in the economic downdraft and onslaught we have faced this round. The "Technology Sector" might rightly be named the "Friendly Banker Sector", as that seems more to determine who lives and who dies.

Investment timing and asset management count for a lot, and preemptive cash flow actions count for a lot. Low cost manufacturing is important, as always. Pricing leverage with key customers, to avoid the intense pricing in the commodity market spaces has counted for a lot this time. Technology counts for something, but is not the be-all and end all of success. At the end of the day, management's appreciation for, and response to, the pending crisis...what they realized, what actions they took, and when they took those actions...has shown itself to be the difference between life and death.

Oh, yes, and sadly, who your friends (with money and patience) were and are, was critical. Those who had the capacity to expose huge risks to their shareholders and creditors, and keep spending when all hope was lost, and then, when those pathways were exhausted, go back to their bankers and governments, have consistently dominated the more timid and business-prudent competition. Not that what they ended up with at the other end was 'good'...with its persistent low margins, large-and-larger capital calls for new fabs and new technology, and providing "long-term care" for businesses that they themselves created, but then were forced to suffer with 'until a sunnier day'.

Near Death today...Death Tomorrow: Since the early 1990s in memories (and sometimes before that, too), there was no 'sunnier day' ahead for profits that even came close to making up for the losses suffered in such 'survival downturns'. Not even close. The exception, the early-to-mid-1990s, saw a wholesale retreat by Japan from the chip market, leaving a vacuum for anyone to fill, profitably. Since the end of 1995, the 'memory industry' has been a net sinkhole for money, by a wide margin, though some players with some products have sometimes made it a good business. But, even in the industry's good times, the seeds of later destruction were already planted, but had not yet poked through the soil. Good profits were added to outside capital and plowed back into the industry, ensuring a supply glut later on and also, at the same time, that R&D had to be maintained at a high level to cost-reduce to meet those low prices.

Wise men (who left) and a very few excellent business men (who stayed competitive) made the right decisions, in retrospect; the vast majority of memory industry players stayed way past closing time, and when the final tally was completed, could only have been deemed failed business ventures.

But, if economic theory tells us anything, it says "Do not do this." Let the failures fail, clear the market, free up the resources to make useful product with true EVA--Economic Value Add. Otherwise, the industry will persist in taking two dollars of resources to make one dollar's worth of end product, creditors and shareholders will lose their investments, as the eventual day of reckoning will come.

Over the timeframe of 2004 through the end of 2008, NAND Flash came down in price nearly 100x. Most NAND flash applications fell easily under the sway of MLC NAND, with its lower costs (prices), which were gladly accepted in exchange for its reduced performance and endurance (specs). However, much of the SSD space claimed to need, and depend on, SLC NAND for sufficient specmanship and performance. Still, as in all applications, MLC was steadily improved in its performance, and 'patched MLC' NAND, with advanced software and sometimes hardware improvements, eventually became acceptable for many or most HDD replacements.

However, the latest data and analysis from Digitimes [24 Jun 2009: SSD penetration in PC market remains low, Members only] indicates that laptops with SSDs, in 2009, still will be only about 1.5% of total laptop shipments (though Gartner ramps it up to 20% in 2010, but we shall see), and the price of SSDs is most often given as the critical shortcoming amid a host of technical benefits for SSDs, real and perceived: lower operating power, faster reads and writes (easy random accesses), and G-force ruggedness.

But, all performance issues aside (which are now 'no news'), it is the SSD pricing that is keeping them away from wholesale adoption in the compute space.

While some technical criticisms remain, the most significant limitation is cost or price: Corsair's newest 128GB SSD carries a retail price of $414, against a HDD of similar capacity, for which it's easy to find 160GB HDDs for under $100 (and as low as $35). The Corsair SSD line-up has better performance, to be sure: 240MB/sec reads and 170MB/sec writes. But it will probably take a while for the consumer to understand what that means to him in terms of improved workload processing, impatiently waiting for data, and productivity.

Today, one has to ask what this extra $300 might be worth to the user, or how large that class of users who value SSD over HDD, at +$300, might be. Or, is this the BEST place to spend an incremental $300 on a system that costs about $1250 +/- $250, given other software and performance boosters that are available. Adding +25% or so in price is, yes, a significant price uplift for SSD's 'turbo speed' compared to HDD. For sure, some users and applications REALLY need the increased storage speed that SSDs offer. But, most, we think, will likely bide their time and wait for the eventual improvement in the "SSD Value Proposition".

Even in the low-capacity drive space, 32-64GB, SSDs are the high-priced spread, by a wide margin. So unless SSD makers can sell the 'consumer benefits' of their product better, the market will be thin for a while. The eternal hope of SSD and NAND Flash makers, that future NAND price reductions will bring HDDs within striking distance of NAND-based SSDs, is offset by the persistent trend in PC/Laptop applications and use, to 'demand' larger and larger capacity disk HDDs...by up to 20%/year in the high volume PC and laptop segments...today 160GB or 250GB, and tomorrow 200-300GB. Overtaking the HDD-in-laptop capacity trend line is a tall order for SSDs: the larger the drive, the more cost advantage HDDs have.

Put that on top of the fact that what we have seen 'recently' (the past five years) in NAND price reductions is probably an unsustainable trend, and will have to be slowed down due to technical barriers and the current lack of profitability among NAND makers. Nearly exhausted by running so fast for five years, and sinking so much money into technology and fabs, they have barely come close to the lagging end of HDDs, as they find their capital nearly spent.

What we see today in the SSD space, is early adopters, those who REALLY value lower power and better R/W performance of NAND Flash. But so far the price is steep, and a general overtaking of the broader HDD market, at least with pure SSDs, is not in the offing unless something changes pretty dramatically, no matter what the flash price curves look like.

If one looks at the average prices of either laptops or desktops in the past 10-15 years, too, it is down-down-down. There is huge resistance to increasing prices for the "Typical System", no matter what the performance, or what the performance improvement is. Sure, there are high-end systems, more costly and with more performance. There is always a spread of users and applications, from ultra-cheap and performance limited, to ultra-expensive and powerful. But it is the Middle Class where the high volume is. Unless SSDs can crack that nut, they will forever be elite specialty customer plays.

Changing mindsets: So, with the experience of about five years of talking, designing, building and selling SSDs, we collectively have a greater understanding of what might lie ahead, and/or how apparent barriers to SSD adoption might be overcome. For one, our concept of the "Computer-HDD" market, and its applications, has to be de-homogenized and scrutinized several levels deeper than viewing it as some monolithic construct. There are large groups within the market which will embrace SSDs, while others are too price-sensitive to do so. If corporate IT managers can find a way to keep employees from filling up their computers with home movies, vacation photos and other large GB applications, maybe a desktop computer with a 32GB SSD is plenty for most workers' legitimate business needs. This, however, is contrary to the PC trend of the past 30 years, to 'client empowerment'. But, it is not impossible.

Consumers can ask, "What is faster seek time worth, really?" Designers can ask, "Are there interface conventions and legacies that could be circumvented or overcome with some kind of clean-slate, fully optimized flash drive approach?"

So far, the Solid State Disk crowd has been thinking totally IN the box...the box made, defined, interfaced, prescribed by nearly 30 years of HDD-in-PC experience, from the time of the PC-XT in the early 1980s: a pure scaled-down IBM System mainframe memory subsystems...MPU-L1-L2-(L3)-DRAM-Disk-(DVD backup). The form factor and interface of SSDs, so far, is to make them drop-in compatible for HDDs, without disrupting the existing system architecture. Surely, the industry can do better than that, given the power and promise of raw NAND Flash's truly disruptive technologies.

For a while, it looked like the netbook might be the breakaway from HDD, with something of a clean slate on which to draw hardware and system software from the ground up. But though the market is exciting and fast growing, it has not embraced the SSD in a significant or innovative way. In fact, HDDs hold the high ground in the current crop of netbooks, though we are still a long way from the finish line, as varieties of small "computers" proliferate. So, what form of storage will be adopted in this part of the market it is not a settled issue.

Still, for the broad masses of laptops and desktop PCs, a complete SSD solution is probably not within reach any time soon (like, by 2013 or so), though undoubtedly, they will be picked up by early adopters, and those with special workload requirements. Much of the early enthusiasm, and many of the agressive penetration forecasts have been tempered by time, and by the hard market realities.

But, all is not lost, by any means.

Flash Caches are again in the news: Perhaps a more promising approach is a recurrence of flash-caching, in which a smaller SSD (a booster 'flash array', or HDD cache) with good software, can come close to the performance of a full solid state drive, but with the bulk of the system GB still on the HDD, at far lower cost (or 'average cost/GB') for the total system. This concept first appeared years ago in the early days of SSD-talk, but was quickly dismissed in the clamor to go directly to SSDs. Development, more discussion and market, technical and pricing realities for all competitive products have resurrected talk of HDD caching methods and systems. Today, we understand better, we have better flash-cache products, better hardware and software, and we see the naivete of thinking NAND flash would catch and surpass HDD in overall system cost, for the capacities widely in use in computer hard drives.

Future NAND price reductions will be much less than what we have experienced: Users of NAND Flash have become accustomed to annual price reductions of 50-60% over the past five years, built on strong GB demand growth averaging more than 150% per year. However, a conspiracy of events...financial, technical, economic and 'perceptual'...are expected to slow this rate of price decline by up to 90% for the next five years: from 100x price/GB improvement to 10x improvements...or even less. In addition, the industry is definitely facing a point where higher performance NAND will truly cost more per GB than lower performance NAND (endurance, RW speeds, or other valuable metrics), just as SLC NAND costs more than MLC today, but is used only in selected 'cost justifiable' applications. When x3 and x4 cells' share of the market grows, and SSDs gain further traction, a highly-fragmented market is almost a certainty, and the hi-low price spread for various flavors of 'flash' could be as large as 5x, solely on differential costs to produce various performance and endurance feature-sets.

In short, the NAND marketplace can be expected to take on a whole new character for the five years out to 2014, as technical progress aimed at cost reduction becomes more expensive and harder to come by, as 'performance degradation remediation' becomes more complex and 'controller-logic-and-software' intensive, as NAND vendors are forced by their managers and shareholding masters to make it a good business, and as new markets cannot develop and expand fast enough to sustain the former GB growth rates.

Most of the low-hanging (technical) fruit for NAND cost-reduction has been picked: In the past five years, lithographic shrinks were at first easy to achieve, as NAND caught and then surpassed DRAM as the 'memory process node leader'. The move from 'SLC to MLC' was low-hanging fruit waiting to happen; almost everyone had proven it out in the lab and fab years earlier, and it just took some 'seed crystals' of market competition to precipitate a wholesale transition in the market (exc. Samsung). Sustained high GB growth brought improved scale economies into play, too, as "SG&A and R&D per GB of NAND shipped" declined almost in proportion to GB growth. Also, much progress in price reduction has come at the expense of beating down manufacturers' profit margins to the point that 4Q08 was 'all red for all vendors and all products'. Indeed, 2008 ended on something of a hard stop to all this, with moves to x3 and x4 cells stalled for a variety of technical reasons, and with troubling performance hits, as well. Manufacturers' profit margins were at bare metal levels, or lower. The "One a Year" lithography shrinks, density-doublings and process node migrations are today not always affordable (tight cash and non-existent profits), but also technically more forbidding. Much new technology has to be investigated and mastered..."85-90nm to nom. 40nm" is far easier than "35-40nm to nom. 20-22nm" is expected for 2014 will be.

The look ahead, pricing progress: The modest NAND price recovery we have seen in 1Q and 2Q is just a time to rest and regroup, but the eventual resumption of price competition and reductions will be much more measured than formerly. No vendor can afford price reductions of ~50%/year any more; no one is capable of cost reductions of anything close to that. Importantly, many of the iconic personalities who bet on the sustainability of the fast growth investment and R&D strategies of the past period are moved on, in light of stubborn markets, declining profits and huge financial damage in the past year.

New NAND demand and markets for growth will also need 'cultivation'...and time: On the demand side, most NAND used today is relatively primitive, compared to its expected technical potential. A vast fraction of the GB used are lodged in applications with modest RW capabilities, tolerance for large innate silicon imperfections and failure rates (then corrected), and limited endurance.

This too, was low hanging fruit: camera chips riding the digital camera transition, USB drives to replace 'floppies', audio store for MP3 players...almost all replacing technologies that were well past their prime. These were also 'ready markets' requiring little market development by vendors, thus avoiding a time-consuming and irregular growth path. It will not be so easy going forward, and the huge price down strides made by NAND in the 2004-09 era are not likely to be matched. One has to look no further than SSDs, to get a feel for the difficulties and costs, the hit and miss, as well as the technical, standard-setting and price-performance roadmaps that have to be argued, developed, applied, rejected or modified for new and sophisticated markets to develop. It is a slow and painstaking development process. In addition, current and forecast prices always attract new applications; if one stifles the outlook, it may stifle the energy seeking new places to take advantage of "Sea Change Pricing" that has been a part of the NAND Marketing Call for many years.

Industry's perpetual efforts to cost reduce, and demand diversification, will drive broader product mix: What we see as a still rather narrow line-up of NAND 'performance' capabilities will become a sprawl, as elemental technologies are applied in novel and unique ways to serve diverse markets, having different needs and price points. More bits per cell always (so far, for all vendors and all products) means lower performance. "SLC to MLC" meant endurance dropped by about 10x-20x, from 100K cycles to 5-10K write cycles. For most applications, users would rather have the 'half-price' pricing than the 100K cycles. SanDisk was able to keep performance the same going from x2 to x3, but not without some considerable remediation: productivity went up only 20%, not the expected 50% in bits per mm sq., due to extra 'performance-management' circuitry. Fewer stored electrons per memory bit means more finely tuned sensors, and, almost invariably, more die area, reduced performance and more build cost. In addition, SanDisk seems, a year later, to be the only company with x3 in volume production, and that not even at their most advanced process node, which has deliberately lagged by one node their cutting edge SLC and 2MLC production nodes.

And though a move to x4 would give production cost benefits comparable to those gained when the industry moved lockstep from SLC to MLC in 2004-6, it is no slam dunk technology, by any means. Tight R&D budgets, resulting from huge operating losses for the past year, will not make anything easier. It is not likely, or even not possible, for all NAND vendors to have fully developed their "nom 22nm x4" technology in 2013/14. No chance.

Today, the line up looks as shown in Table 2, NAND Makers lithography, MLC status:

note: percentages refer to fraction of wafer starts at that process node

Bold guesses: NAND price outlooks: If NAND prices "today" (using 12/31/08 as 'today') are nom. $2/GB for MLC, then by the close of 2013, we expect to see a smattering of x4 NAND, with severely constrained performance, with best-NAND pricing of about 50-60 cents/GB. SLC and "SLC level performance", needed in some applications, is denied the benefits of the move to more bits per cell, since device performance is too compromised using today's design methodologies, so the $4.00/GB+ for SLC of today maybe declines to less than $1.25/GB by year end 2013, with progress coming largely from litho node moves, making some allowance for moving to sustainable profit margins and better cell constructs and continuing improvements in scale economies.

In fact what we have seen in much of the NAND flash market pricing is a thinly concealed compression of vendors' Gross Margins, coupled with a capacity of chip designers to 'engineer out costly features, performance', which today's NAND end-markets can easily do without...'defining down demand' attributes...and replacing what in retrospect can be viewed as "Cadillac NAND" with "Tinplate" or "Plastic" NAND, at far lower costs to build but fully adequate for most of today's needs. Full priced SLC was shipped in 2004, because there was no half-price MLC. Once MLC became available, it was found to be 'good enough' for 'almost all' applications. But it is not at all clear if x3 and x4 performance, without significant costly 'performance remediation' WILL be 'good enough for those same uses.

Consequences and impacts of price slowdown: This "Sea Change Pricing Model" moving to a new "Change of Heart Pricing Model" can be expected to cause major changes in the industry's view of end markets, vendor investment expectations, competition and potential market consolidation. Importantly, huge NAND price reductions in the past five years have enabled SSDs to barely make a dent in HDDs into PCs; with declines slowing, how does that change our thinking about the outlook for SSDs? This will be the subject of our next BLOG, next week.

Memory and Memory Subsystems (MSS), long accused of being the bottleneck to higher system performance, and 'throttling' the MPU with their high latencies and addressing limitations, now finds itself also as the "bad boy of power consumption." Other server system elements have made great strides in power reduction, but at the end of the day, memory 'owns' more of the system power consumption than any other system element. Server Farms, recently a sign of 'advanced internet evolution', are now in the Stink Pen insofar as energy consumption is concerned.

And though steps are underway to reduce power of the MSS, after all is said and done, 'It's the Memory Subsystem, Stupid'.

For most memory designs, too, cost reduction (= die size reduction) remains their foremost objective, though, to be sure, power has moved closer to the top of the design objectives list over the past few years. For the 50nm node products, the main benefit appears to be productivity: moving from 65nm to 50nm, plus the evolving benefits of superior designs, give 2x the die/wafer and more performance. Ceteris paribus, however, power comes down only fractionally, unless the 65nm design was 1.5V and the 50nm was 1.35V.

The tools for reducing power consumption among memories, with some liabilities for performance and build cost, are understood, though many possibilities also lie in wait. Reducing operating voltages, as has been the mode recently, is pure goodness; the high-performance speed bins still seem within reach; the user gets 20% power saving, almost for free...x2 to get the power savings for reduced air conditioning and assorted system build costs.

But, one might ask, if this is such low hanging fruit to go from 1.5V to 1.35V, why not go one more step without a pause, to 1.2V, and get double the benefit? And, even 1.2V does not seem to be any other than an 'industry convention'. Systems with 1.0V or even 0.9V have also been demonstrated in test vehicles, and seem fully achievable...though maybe not productionable for all the end markets that DRAMs serve.

Should more finely-segmented arrays be an option that goes back on the table, to reduce power? For complex server DIMMs, with 36 to 72 chips on each of them, is there a place for 'intelligent design', and more informed and advanced control of the elements that make up DRAM power consumption...refresh, chip and array select, power-down modes?

Mobile MSS power issues/concerns: In phones, and in the larger mobile segment, one of the great forces trying to squeeze DRAMs out, comes from the power-concern side: Swapping NVM/PCM for DRAM makes for nonvolatility AND fast read-write. The MSS (meaning, in this case, LP DRAMs + NVM) constitutes up to 30% of standby power consumption in mobile phones, so it is a big hit on talk time, and makers are 'motivated' to get the power down or out.

Laptops and Desktops: Though LP DRAMs of sorts have been around for many years, we know of no laptop computer which uses them. The memory subsystem is not the power hog it is in phones, and the savings by using 'LP' DRAMs over PC DRAMs, is not enough to justify more MSS cost with higher prices DRAMs and 'LP' DIMMs. However, we have seen in just the past six months, an early and quick take-up of DDR3 DRAMs in laptops, highlighting their lower power capability. Some of this is 'green marketing' to concerned buyers, but the power savings are real, though perhaps of little consequence in terms of battery life. BUT, laptop interests, which now make up more than half of PC unit shipments, and their low-cost cousin, netbooks, may be the force that tips the DRAM voltage discussion in favor of a quick move to 1.35V and then 1.2V DRAMs. What's not to like?

For desktops, cost is paramount and they are almost all plugged into the wall. But, so as they have wagged the DRAM tail for so long, maybe they are about to lose control of the DRAM voltage or LP feature roadmap, be hoist by their own petard, and eventually have to make do with 'what the other guys define, and make'...as others so long have had to dance to their fiddle.

With netbooks being the fastest growing computer segment, by a wide margin, and something of a tabula rasa as far as legacy system design constraints, maybe the Netbook marketplace will entice new DRAM lower power technical developments which then will migrate UP into laptops and PCs. With 20M+ units a year, and +2GB per system, maybe DRAM vendors will try for power differentiation in new and innovative DRAM and MSS designs.

Servers: Server DIMMs, historically pushing the chip-density and DIMM density envelopes, pose the microelectronic version of what the server owner reads on his utility bill. Around the server industry today, 8GB and 16GB DIMMs are the new bleeding edge, and even if they use the newer DDR3 DRAMs, or better still, DDR3L, servers are still rather huge power consumers, constraining system design, mandating larger power supplies, heating and cooling, fans airflow, 'hot spots', etc.

IBM Goes from 'Bipolar' to 'CMOS' in early 1990s, dislocates people, fabs and technology roadmaps: Maybe I am reminded of an anecdote I first heard when I went to IBM in 1995. Until IBM decided to reform its chip business in the early 1990s, and let loose of its 'backward' ways, all the close-in and high-speed system caches were bipolar...lagging the merchant industry's embrace of CMOS over HS bipolar which occurred as much as a decade earlier. But, in addition to the fab process problem, letting loose of all its bipolar capacity in Fishkill, NY (vacating Dutchess County, NY, as it closed down and eventually refit its fab to run CMOS), the major complaint came from the board designers, who had gone to great lengths to 'handle the bipolar power problem'...heat sinks, fans, intricate thermal analyses, limitations of chip layout density on the boards...system cost and performance constraints.

This kind of problem the 'memory industry' faces today; whether there is a simple "bipolar-to-CMOS" solution so close at hand as there was in the early 1990s for IBM, remains to be seen, but seems not probable. More likely, the solution will be piecemeal, and made up of many evolutionary changes over a long period of time. In servers, FB DIMMs was a start three or four years ago, to attack the limited address capability of Registered DIMMs and, for sure, some things were learned along the way. But FB DIMMs had no traction, and a limited following, and were subsequently replaced by better (and denser) R DIMMs..and been wholly replaced by a separate discussion for the follow-on generation of server DIMMs, so called Load Reduced (LR) DIMMs. FB DIMMs was maybe the last 'technical challenge' that was pure performance-driven, with little regard for power, which eventually came back to bite them in the AMB.

But the power problem, so long pushed aside in favor of 'more performance', is real, it is here, and it will get worse before it gets resolved.

Fortunately for the memory industry, signs of recovery have been apparent for about the last two or three months, so there was reason for business optimism. But, no matter how much the profits and headcount of Silicon Valley's corporations have been impacted during this worst-ever downturn, new ideas and technical advances just keep on coming. This year's theme, "Beacons of Innovation", was apropos, and MemCon brought new products and technologies to the fore, and improved understanding to more mature discussions and products.

Now nearly forty years old, the 'semiconductor memory industry' is hardly maturing. The industry's future, the technical and standards roadmaps, and the issues are as hotly debated as ever they were, albeit at line geometries that are 100 or 1000 times smaller, and costs that are 100 or 1000 times larger. And, we should add here, risks that are also 1000 times larger. In chips, everything scales up, or scales down!

The full MemCon agenda can be found at www.denali.com/memcon

My favorite take-aways and impressions:

SSD talk; still talk: The topic of SSDs has been a mainstay at Denali's MemCon for about four years, often viewed as the Next Big Thing and market driver for NAND Flash. Indeed, one might surmise that SOME substantial fraction of the est. $35B invested in NAND manufacturing capacity in 2005-08 was exactly for the purpose of supplying that market demand. But with still weak take-up of SSDs from netbooks, to laptops through desktops, and onward to the enterprise market, the bloom is off the rose more than a little, to hear what most speakers were saying: the message is still positive, but manufacturers are clearly disappointed with the size and commitment to today's bona fide "SSD" business level, and probably tomorrow's SSD market outlook. NAND prices are still way too high compared to HDDs, despite declines of 50-60% per year for those same past five or so years. No sooner than one technical 'whattabout' raises it head, and is resolved, than another shows up to again retard the significant adoption of SSDs in the top-to-bottom computer line up. To the rescue, to continue the march to improved storage performance economics, come more improved caching systems (see Denali CTO Mark Gogolewski's talk), more software tools and a better understanding of system 'usage models', which get more out of less. This evolutionary process, without huge leaps into the SSD unknown, nor buy-in of fast evolving, expensive and (some say) unproven technologies, is making the transition to total solid state both more measured, but also less risky.

Still today, big unknowns still lie ahead for SSDs (or, as it were, the 'known unknowns' like "what will be the cost, and performance impact of x4 cells and sub-25nm processing?), just as the industry probably under-appreciated the issues it would face in displacing a significant fraction of those HDDs that were in computers, from the vantage point of back in 2004 and 2005.

Performance NVM market: In fact, even though ONFI has been here for several years, and toggling for only slightly less, the high speed NAND flash market is still in its infancy. It is still viewed as having undiminished promise to deliver NAND and SSD bandwidth in multiples of what is widely available today. Ed Doller, in his kick-off keynote, showed a slide of today's NVM applications, dominated today by NAND, in which a huge fraction of the GB lodged in low-performance end of the spectrum: USB cards, DSC chips, Compact Flash, MP3 players. No wonder they can use x3 cells, with sometimes 10K or even 1K write cycles endurance.

There remain strong believers in a high-end promise of the fundamental NAND technology, which includes the vast majority of NAND-based SSDs, as well as heretofore unrecognized applications. Indeed, much of the Performance NAND effort today is truly pathfinding and technology development, and every week brings a new product announce which sets a new high standard for R/W performance, endurance or cost-performance. All in all, 'Performance NAND' is just getting started, with standards, technical capabilities, and applications all evolving lock-step to exploit what is widely felt to be NAND's huge performance and low-cost potential..

Almost from the beginning, no matter how much the talk was of HDD/vinyl/tape displacement markets, it was recognized that the "NAND-market-fitting" exercise would be comprised of developing its core technical promise, concurrently with developing applications that can project those technical benefits into a product that the market would buy. There has been a constant back-and-forth between NANDers, saying "Here's what we can offer, what we can do"...and users who were seeking to define their uses, and refine their spec and performance needs, to match those of the silicon suppliers.

The devil is in the details: Heading down that same 'spec' and 'performance capability' road, we also heard in Numonyx, EasyCo and others' talks, that software and improved system design can deliver significant improvements in NAND endurance, bandwidth and RW performance...only it is not here yet, and faces an uncertain market--more of the NAND 'Double Do' Problem: what can the silicon do and what does the application need. These are very much two moving targets, with the entire industry trying to sort it out. These several talks posited a new lever that the designer could pull for system performance improvement: delving into the exact details of how the device was to be used, or was being used...'usage models'...and applying more system and silicon knowledge to take advantage of unique features of the application or the silicon.

Repeat after me: Market Fragmentation is coming...or maybe not: If I heard the words "Fragmentation of Product Mix" once, I heard it a hundred times in the course of MemCon. The market needs a more diverse mix of DRAMs and NAND flash to best serve its technical needs and low cost requirements. For markets which place huge pressures on commoditizing their constituent products, and 'terminate with prejudice' any attempt to add bells and whistles, this is a new froce that has to be reckoned with...and we can only wait to see where it comes down. It does not appear that gravity can pull the pieces together, either for NAND or for DDR3 DRAMs. New products, and new applications of available flash and DRAM technology, will appear and be accepted or rejected by the market.

For DDR3 DRAMs it is now, PC DDR3 and DDR3L(V) for 'low voltage', which, instead of the Standard 1.5V, can be 1.35V and maybe eventually 1.2V), plus Low Power DRAMs...LP DRAM, Mobile DDR and LP DDR2, plus Graphics DRAMs (or G DRAMs). For NAND, the SLC of 2004 has become MLC and now soon x3 from some vendors; most expect an eventual x4 cell that can store four bits, with yet t.b.d. performance and cost for the 'degraded sockets'...and another shoot out the top for HS NAND flash: toggle of ONFI interfaces and roadmaps.

Efforts to pull all these contradictory and conflicting trends together, to reduce the product set to a small number of parts, are being thwarted by application trends that need either low cost or high performance, to nearly the exclusion of the other characteristic.

All of that is just my 'tip of the iceberg'. There's much more on the Denali MemCon website, www.denali.com/memcon, which has PDFs of all the presentations, actual webcasts of some presentations (with audio), and a MemCon Community website with discussion links to like-minded attendees and others interested in the discussion and topic of this year's MemCon.

Again, we'd like to thank our Platinum Sponsors, Samsung and Rambus, our Gold Sponsor, Numonyx, and our Silver Sponsors, EasyCo, SanDisk and SPMT. We'd also like to thank our track sponsor and Conference Partner, Web-feet Research for their support. We know how scarce funds have been since the fall financial meltdown, and appreciate their continued support.

What has changed since late 2008: As late as 3Q and 4Q08, DDR3 DRAMs could only be found in high-end game PCs, where they were attractive for their higher performance, and where the market could support their higher prices. In early fall, DDR3 DRAMs still cost 2x-4x DDR2, though admittedly, DDR2s were at something of an all time historical low of 60 cents. Today, DDR2 prices have come up a lot, and are now in the $1.05-$1.20 range for 1Gb ($9 or $10 for 1GB DIMM), closing the gap from the bottom. But newer DDR3 designs have also reduced the earlier die-area disadvantages, thus reducing production costs. And DRAM makers seem to have decided, 'If we are shipping $1 with every 1Gb DRAM, it might as well be a DDR3 DRAMs, which has a future...and that Taiwan's price bombers do not have yet to any appreciable degree.'

At the crossover speeds, DDR2 800/1066 and DDR3 1066, prices are very close to one another. At DDR3-1333, there is a mixed and sometimes significant premium for DDR3 compared to slower DDR2s, which, if the history of DDR1 and DDR2 pricing is any guide, will be whittled down to nothing in a few quarters' production and use. DDR3-1600 is still not found in any PCs that we have seen...but for DDR2, recall DDR2-533 was kicked off 3Q04, DDR2-667 took up 1Q06, and DDR2-800 was really a 'post-mid-2008' phenomena (and still growing, displacing -667s)

Low Voltage DDR3: Last year, the industry devised an alternate Low Voltage Roadmap for DRAMs. The standard DDR3 spec called for 1.5V operation, which had been decided nearly a decade ago. The low voltage roadmap agreed on last year calls for a 1.35V option, designated DDR3L, which saves about 20% in power (subject to many other considerations and conditions, of course). But most vendors can hit the performance spec even with this reduced voltage, so it is expected to be adopted widely; all major DRAM makers have 1.35V product and roadmaps; Samsung and Micron announced DDR3L server DIMMs and SO DIMMs a few days ago, for (almost) everyday applications...and it is only a matter of time before "L" comes to dominate DDR3 production. There is also an even more agressive 1.2V discussion and emerging DDR3 (or DDR4) spec, but it is still too remote to forecast the timing and extent of adoption...but the preponderance of heat-spreaders on DDR3 DIMMs should give some indication of where the power problems lie.

DRAM makers have consistently been able to produce the top speed grade at high yields, for DDR1 (>-400 to -600) and DDR2 (>-800/1066 to -2100), so they have wisely been reducing the operaing voltages, for 'green considerations' without compromising premium sales.

For users, this "L" roadmap is 'free' power reduction.

Off the charts, too: While the DDR3 specs are -800, -1066, -1333 and -1600, an additional bin at -2133 is under discussion...mostly aimed at PC makers. However, there is a vibrant market for gamers and overclockers, which offers many other variations...-1800, -2000, and Elpida's fastest-to-date, 2.5GHz 'technology showpiece'. These varieties may calm down in the next twelve months, as the -2133 spec moves forward for affirmation.

For most vendors, DDR3 will really take of with their nom 50nm DDR3 designs, which will be hugely productive (die/300mm wafer) and could be DRAM maker's ticket to profitability in 2010.

The Company: Unity has 42 employees, with a wide range of semiconductor pedigrees from Inmos, Micron, Fairchild, Ramtron, Simtek, and AMD. It is headed by Darrell Rinerson, formerly an Executive at Micron Technology, who with two others founded the company in 2002. Darrell is the lead patent developer listed on most of the patent plaques lining the entry hall of the companies' Sunnyvale facility.

Now seven years old in development, and with a total of $75M in three rounds of funding, Unity is confident enough in its technology and roadmap to start talking to manufacturing partners, as it concurrently moves product and technology development from 'proof of concept' to 'characterization' and something close to 'production-readiness' over the next two years.

Should this technology pan out in a way close to what early analyses and tests have indicated is possible, at equivalent process nodes, CMOx can be expected to have 4x the density of NAND flash, 5x the write speed of NAND, and require little in the way of special processing flows. Compared to MLC NAND's 2F2 cell size, CMOx's is merely 0.5F2, and it has no transistor to limit extreme scaling. Though still two years away from production-readiness' CMOx memories are being positioned as something of 'The Mother of All Storage Class Memories' that are taking aim at sockets where conventional silicon cannot reach for price or performance reasons. Conceivably, CMOx could even replace HDDs, and expand markets into heretofore unidentified markets, applications and products.

These are 'Great Expectations', to be sure, and a long road to travel between today's 64Mb test vehicle, now undergoing characterization in Unity's labs, and its 64Gb device, scheduled to be available in 1H11.

Novel manufacturing process flow: With the Unity CMOx storage cell technology innovation, other important business and manufacturing decisions can change. For one, for the first several masking layers, Unity's wafers can effectively use a standard bulk CMOS process, at a back generation process node, for the FEOL. They can buy common 90nm processes wafers for their CMOx memory feedstock. These 'pre-uncommitted memory arrays' are then transferred to a more state-of-the-art BEOL, for the metal oxide and metal layers, and deposition and building of the actual storage features.

'Go to market'...how, exactly? Furthermore, in the midst of today's memory meltdown, Unity is very interested in its own go-to-market model, and intent on devising a method of taking its product to market without creating the overly-commoditized bloodbath we have seen for more than a year in DRAMs and NAND flash. For this, their 'plan of record' today is to join forces with an existing memory manufacturing partner, and have limited production sufficient to service that market that can use the superior performance of CMOx (at a price, to be sure). Of course, they will have to weigh carefully the option of reducing prices and broadening the market...but this decision will have to wait until the product itself is fully characterized and the existing and potential 'high value niches' better understood.

Unity is convinced that broad licensing of CMOx would collapse the market into a food-fight, and leave everyone with nothing, as it has, periodically, for traditional DRAM and NAND flash licensing programs almost since the industry's inception.

Licensing, adoption, production: evidence and options:

To add some perspective to this problem, specifically that of the owner of a potentially valuable "Memory IP", it is worthwhile to see other ways of 'going to market'. These days, Pure IP Developers are denigrated in some quarters as being 'patent trolls', leaches and worse. They 'make' nothing, and are viewed as riding on the backs of those who do make products. Historically, IP developers made products that demonstrated the value of their IP, and got paid in product profits. Sometimes 'secret sauce' of proprietary but undisclosed and unpatented technolgies, remained out of view for years from competitors. But, especially among the industry's early founders, broad cross-licensing took place, and no one was denied access to any other technical developments in their field, though license and royalties flowed continuously. That started to change in the mid-1980s with a huge TI patent offensive against DRAM makers, and was turned on its head entirely with the founding of Rambus in 1990s, who was the first pure-play IP company in the industry.

The conundrum is that however much the IP costs, the cost use it in a DRAM/memory/semiconductor product, and take it to market, is far greater, with today's $3B memory fabs and established channels to customers. A standalone IP developer has to find a manufacturing partner to bring his ideas to life in the marketplace, and to profitabliity. And, even if one has an allegedly superior capability, it is no guarantee of a big money stream, and there is never any guarantee that it is 'forever.'.

Rambus DRAMs have demonstrated superior performance to standard DDR1-2-3 for more than a decade now, but have not enjoyed significant take-up in the market, and have thrust Rambus themselves into a never-ending sea of lawsuits...which pariah status Unity seeks to avoid.

There are, of course, instances of sustained significant technical leadership and profitability from time to time in the semiconductor memory business, but, as all the players have the same basic tool box (or, sandbox, since its silicon), eventually Intel loses its HS 1K and 4K SRAM monopoly to Hitachi, Inmos and AMD; Samsung loses its 8M WRAM monopoly to DDR1 and wide IO, Standard G DRAMs and IBM loses its UHS SRAM sales leverage with customers Sun and HP, (sustained at $140/8M unit for years) to Samsung, and then GSI (though other factors were at work there, too.) System manufacturers are highly adept at working around costly components in their systems (see "History of RL DRAM"), as are the thousands of engineers working on new materials and methods at working around what appear to be an insurmountable patent position. Wang Labs x9 SIMM patents, earning them a cool $90M in the early '90s, became worthless with the onset of x32/x36 DIMMs. CDMA technology from Qualcomm is a non-memory example, with which they have generated a significant monopoly profit stream AND widespread adoption for many years, though not without a battle at every juncture.

Rambus, Wang Labs and sometimes Qualcomm (and formerly, TI) have engendered some intense bad feelings in the industry by the way they 'exploited' their IP...which they feel is just getting paid for their technical contributions, "and if you don't like it...'

Balancing what some would call 'IP greed' with market needs and 'ability to pay' is a hard act to manage, as we have seen many times. Broad licensing and cross licensing of IP has been the common industry practice since its earliest days; good for the consumer, but maybe not for the IP holders or other intermediaries, who cannot differentiate their products.

Unity's manufacturing partnership plan is their way of limiting access to their technology, bringing production only to a level of a manageable market presence that shows good profitability in those applications that can appreciate CMOx unique capabilities. Once the show hits the road in 2011, we will see how well this works. (Saifun faced a similar quandary when they developed NROM technology...be an IP company or build a fab? This was discussed in an early DMR article.).

The Challenges Ahead: This looks like a promising technology worth watching. Only more time and more development and characterizations, and more critical evaluation in real-life applications, will tell us if CMOx is as good as it now looks. Many other technologies looked good for a while, but ran into cost, scalability, or performance challenges that could not be successfully overcome. MRAM was all the talk 3-4 years ago, but has given way to Phase Change Memories (PCMs) today as the most talked-about heir apparent to the extensible silicon roadmap on scaled NAND flash. With technical roots, and claims of Universal Memory Domination dating back at least to the early 1980s, Numonyx informs us in a press release from last December that they shipped the industry's first PCM memory for revenue in 4Q08.

In addition, the Status Quo is not standing still; silicon NAND marches on, downward in cost, towards and beyond 30nm processing by the time the first CMOx 64Gb device is shipped in 2011.

But if these claims come anywhere close to standing up under two more years of development and scrutiny, CMOx's domain will extend far beyond where we see silicon NVMs applied today...'cheaper and faster' is a hard to beat combination.

Abstract: Taiwan wants to be a big player in DRAMs, which we believe is a losing proposition and a strategic mistake, not only for Taiwan but for all DRAM makers. They should embrace their strengths and domination of the worldwide foundry business, repurpose some of those DRAM fabs to make next generation logic, and expand their design and logic foundry franchises. They have much more to lose in foundry than they have to gain in DRAMs...in fact, DRAMs is a sinkhole for money and has been for more than a decade. In the current climate of industry consolidation, megafabs and hegemony for large markets, and the move to fablessness as a superior business model, it is not even an open question which path is better for Taiwan: Foundry logic trumps DRAMs, now and forever.

Taiwan Wants to Make DRAMs After a very tough year-long DRAM market that began in the waning days of 2007, we are now well into the next phase...a more than nine-month agony emanating from Taiwan as is searches for DRAM relief in a variety of proposed consolidation arrangements among the island's DRAM makers. The "Powers That Be" in Taiwan, want to own their own DRAM IP and designs, to consolidate operations to reduce redundancies in design and development, to gain scale, and be large enough and tough enough to compete (mainly) with the Koreans. DRAM market leader Samsung and side-kick and rival Hynix, which own about 30% and 18% of the DRAM business, respectively, each makes more than ALL of Taiwan's DRAM makers combined: Powerchip, Nanya, ProMOS, Winbond, Rexchip and Inotera, plus or minus some allowance for Taiwan-based DRAM production which is owned by and built for non-Taiwanese DRAM makers (namely, Micron (JV Inotera) and Elpida (Powerchip and JV Rexchip), now that Qimonda is out of play). Taiwan has set for itself a formibable goal, from a weak position today, in a very tough and unforgiving market.

DRAM makers, worldwide, lost about $20B in the 2001-03 aftermath of the dot.com bubble bursting, and have lost another $30B this cycle, from late 2007 though the middle of 2009.

Taiwan's DRAM makers themselves have lost about $1B per quarter for the past six quarters (see table below), and hold huge amounts of debt, said to be in the vicinity of US$14B. When the 'profit' numbers for 2Q09 are tallied, another $1B will be gone forever. And, despite a long time coming in discussion, no firm plan seems to have emerged from the Taiwan Memory Corp., except to anoint Elpida with the title of "Taiwan's DRAM IP Savior", to plan to invest about US$300M for a 10% stake in Elpida to bolster its cash position, and to merge ProMOS into the larger TMC/Elpida entity. What this may mean for long-time Elpida partner Powerchip and its Rexchip JV, is not said, but likely they are automatic members of Club Elpida.

Details in the public domain are scarce and it is truly a moving target, but clearly it is much more modest in scope than that which was proposed last fall, which had a scale that was rumored to be as high as US$6B in available funding. We will not know for sure, until there is a formal announcement, and maybe not even then, as huge uncertainties are sure to exist about the arrangement.

What we do know is that it is now about nine months since conversations began, nothing has happened except Taiwan's DRAM makers have kept capacity on line, continued to make DRAMs, and lost another $3B.

The Koreans are the dominant DRAM players today. With their unique corporate culture, with huge financial resources at their disposal and a gambler's penchant to go 'all in', alone, make them formidable. Add to this their incumbent's advantages, their market position, their product set, design skills, manufacturing capacity, technology and experience, and one can see that they are way ahead of Taiwan in many important measures of market success. If history is any guide, they would probably not be dislodged without a large and expensive fight. "Last Man Standing" takes on a whole new meaning when Koreans are in the market.

Samsung's Greatness: Samsung makes twice as many DRAMs as all of Taiwan, owns most of their own DRAM technology (self-developed since Yong Park designed their 256K on Old Ironsides Drive in Santa Clara in 1984), has many DRAM designs in production, concurrently, down to the 40nm node as technology-proving vehicles. They are the driving force in JEDEC in both the NAND flash and DRAMs standards bodies, have a broad and profit-protective portfolio of LP DRAMs (50% share), Dense Server DIMMs (80% share?), and are the G DRAM market leader (>50% share). They are the original Market Creator and Market Leader for NAND flash, with a relatively stable 40% share, and a competitive #3 (belatedly) to Spansion and Numonyx in NOR flash, which remains a $5B business even in 2008.

Samsung has led and dominated every memory market they participated in, for as long as they wanted.

Furthermore, for Samsung, it would probably be a bad business decision to chase more than ~35-40% share of these huge, highly commoditized markets, susceptible to 'price dumping' by DRAM and NAND minions at home and abroad, and general production gluts (as in 'today'). Below-cost prices may hurt Powerchip a lot, but will impact Samsung, whose share is 10x larger, way more, in absolute if not relative terms. And, there has always been a "suicide bomber" in every DRAM downturn since 1979...they kill themselves, to be sure, but take as many innocent bystanders with them, who are too close to the explosion. The recent trend to "Pure Memory Players" exacerbates this potential: "We will not exit memories gracefully, if and since that is the only thing we have." Few memory makers have ever 'reinvented themselves'; most died of low prices and high losses.

With high shares in all major memory markets, Samsung may not grow its memory share more from today, but will improve its memory profitability; for growth, they will have to find greener pastures and still-unfamiliar markets.

Now, add in Hynix, which, by itself, is also about as large as all of Taiwan DRAM makers combined, and who is forever in the thrall of its bankers, anxious to see their investment pan out. Given their apparent willingness to throw good money after bad, and firm in the belief (or so it seems) that all that money invested can again turn green...if the competition gives up first. Unlike Taiwan, as well, Hynix has some good differentiated DRAMs, used in graphics and LP Memory applications...plus NAND flash. Hynix by itself, a distant second in all things memory to Samsung, is still out of reach for Taiwan.

Taiwan, on the other hand, gets hand-me down processes from their partners, six months after development (IBM, Qimonda then Micron to Nanya, Qimonda then Hynix to ProMOS, Mitsubishi then Elpida to Powerchip, Qimonda and self-developed to Winbond), are centered in the sights of commodity DRAMs (having only a small fraction of differentiated DRAMs), and minimize their development costs by paying for technology transfers ahead of time.

We believe that Taiwan, in focusing on strengthening its DRAM capabilities to fend off Korean DRAM dominance, is placing a bad bet, and the wrong bet. The world does not need another DRAM maker, it needs some substantial DRAM capacity taken off line, and restrained DRAM investment going forward. After two strong DRAM GB growth years, of 90% and 70% Y/Y in 2007 and 2008, respectively, 2009 promises to be a bust in terms of DRAM demand growth: pundits are calling it 20-30% Y/Y, the worst in a decade. Reductions in wafer starts are the only way to keep DRAM GB growth down that low for a year, as the steady and 'inertial' yield improvements, scheduled die shrinks and winnowing out back die versions naturally leading to more than 35-40% bit growth without adding a single wafer.

Competitively, as well, Samsung is just too big, too entrenched, and too far ahead for Taiwan to compete with head on. Samsung Electronics is a huge $60B/year electronics business, with high market share and profitable positions in mobile phones and LCD panels, both of which can feed their chip business with whatever it takes to dominate the business. Rightly or wrongly, 'fairly' or 'unfairly', this is an important aspect of Korean corporate culture that must be reckoned with. Hynix' 'family and sponsors' will stop at nothing to stay afloat, as we saw in the 2001-03 dot.com bubble aftershock.

If Taiwan wants to do battle with Samsung/Hynix/Korea, they should do it in foundries, logic and manufacturing logistics, and high-value add designs...where they have a head start and a huge advantage...vs. their 'fire and forget, huge commodity' mentality that permeates most memory makers' way of thinking and doing business.

Sure, it will/would be a good story if Taiwan were to win and establish a sustainable (and profitable) DRAM position. The story would be great: "'The Comeback Kid', How Taiwan's DRAM Business Rose from the Ashes to Become a World Leader"...but what if they lose?...and why not apply themselves in an area where 'Victory' and 'Success' are far more likely, and aligned more with their current strengths and market trends?

Samsung's Foundry Possibilities: Further and finally to this argument, Samsung, The Memory Guy, took 40nm Xilinx FPGA business away from UMC within the past six months, and was reported sniffing about in Taiwan's foundries for skilled employees to hire away. (see relevant footnote on Samsung DRAM offensive, ca. 1990, below).

Although Samsung's System LSI business and 'other' have languished in ignominy for a decade, they show sparks of excellence, and know that they cannot overtake Intel (or grow their sales and profits much more) by relying only on memories. They have been a part of the IBM-led Common Technology Platform roadmap development consortium for many years; they have their own developing ASIC group, and take in foundry (in addition to Xilinx, noted above.) Their System LSI Group is running about $2B a year...a pittance by Samsung memory standards, but it would easily rank in the Top 20 in world chip sales by itself.

Taiwan's Strengths, Taiwan' Exposure and Taiwan's Opportunity: Why "Taiwan" would want to challenge Samsung, or Korea, in DRAMs, is a question that has not been satisfactorily answered in the discussion so far.

But a more important way to look at the problem is to ask, "What are Taiwan's strengths and what are its opportunities?" As we discussed in an earlier BLOG, Taiwan is more of an entrepreneurial culture, against the large Chaebols ('authoritarian' family-owned businesses) of Korea. It is more democratic in decision-making, and less prone to be run by diktat, as the Korean companies are. In Taiwan, there are fewer cozy government-banking-corporate tie-ins than there are in Korea, or than there are in Japan...which tie-ins have some competitive advantages when played against smaller, and more disassociated entities such as are found in Taiwan. Anyone can play in a market with the Koreans, but they play at their own peril, and usually with huge disadvantages in the power that can be asserted in a market, seemingly without regard to profit or damage potential. Though there is a fine line between 'thinking long term' and investing foolishly, somehow Korea manages to make it work. American driveways filled with Kias and Hyundai Sonatas attest to their perseverance and skill.

To see Taiwan's strengths, one has to look no further than TSMC and UMC, the #1 and #2 pure-play foundries, with 50% and 15%, respectively, of the worldwide foundry business. TSMC had sales of more than US$10B in 2008; UMC had sales of more than US$3B in 2008.

This is the Glory of Taiwan, and it is right in the path of perhaps the most important trend in the industry today, 'fablessness for finer line geometries'. It is these next-generation processes that are increasingly expensive to develop by oneself, and will drive more and more companies to lean on foundries as the industry moves forward to advanced process nodes, in the coming years.

In the Industry's Consolidative Phase, Fablessness is Fabulous. As process development costs hockey stick up at 65nm and then 45nm and 32nm, as fab costs approach $3B per megafab, the drumbeat of fab-lite, fablessness and 'mere' design houses, resonates more loudly...and more profitably. While outsourcing of chip manufacturing is said to be in the vicinity of 20% of total chip sales in 2008, an increasing fraction of the industry's profits are to be found there...far from the idle fabs, rusting with depreciation as NAND and DRAM demand lulls, far from those huge capex budgets which strangle the higher-value-add design programs that form the value proposition in end systems into which they are sold, and shut off the profit stream of the whole of the silicon food chain. Fablessness also takes one far from the specialty processes that require constant attention to maintain competitiveness, against products and markets which are forever morphing, and/or wanting to morph into other markets, process requirements and functionalities. This is a huge exposure to a smaller producer...to develop a one- or two-generation process roadmap, then abandon it.

This is the accelerating wave of the coming industry recovery, as high-value logic, ASIC and SoC implementations make Intelligent Designs more production-justifiable and more valuable to everyone in the silicon food chain, than 'mere' bulk bits' (sold at a loss, to be sure). With the current industry 'pause', painful as it is, Taiwan now some slack time to rethink its mission, to take stock of its available resources and skills and reset its industry direction. Through its leading foundries, it is uniquely positioned to become even more dominant in the next stage of industry evolution. Sinking more money into DRAMs is a fool's errand, that will bring good to no one.

Footnote for Consideration: Samsung DRAM Offensive, ca. 1990 Samsung (as "TriStar"...its corporate/family logo) came on the DRAM scene in about 1983, after being the best Korean 'regional semiconductor player' for many years. With great fanfare, LG Goldstar, Hyundai (incarnate in the US as "Modern Electrosystems"), and Samsung all joined hands and jumped in to the world chip business. Not being shy, soon thereafter, Samsung declared its goal to become the #1 Chipmaker by the year 2000. Well, not quite, and not quite yet. But recall that this declaration was made when Intel was about #10 in the industry rankings, behind five Japanese (NEC, Hitachi, Mitsubishi, Fujitsu, Toshiba), TI and Motorola, and two Europeans (Philips, Siemens = Infineon).

But, barely were the Korean's feet wet when the Tsunami of 1985 hit, and forced major retreats and reconsiderations by all three companies. On the surface, they retreated to more traditional corporate names: "TriStar" reverted back to "Samsung Semiconductor", and "Modern Electrosystems" became, nce more, "Hyundai Semiconductor". And, "Goldstar" stayed the same, at least for a while.

They continued progressing on the technology front, but their big day only came when the Japanese Meltdown began in the early 1990s, leaving a huge market void...a DRAM void...to be filled with Korean DRAMs. Toshiba, Hitachi and NEC rode the end-of 1980's wave, but Samsung, with more money and more nerve, was in hot pursuit. When Toshiba showed signs of faltering in 1990, and whose 4Mb DRAM was not the market leader that their 1Mb had been, Samsung came into play with a vengeance.

Throwing down the gauntlet, Samsung hired the Top Guns from right from under Toshiba America's (TAEC) nose: Keith McDonald, TAEC's Director of Sales, Mark Ellsberry, the TAEC VP of Memory Marketing, and Mike Crawley, the TAEC Director of Distribution and Sales Reps, all came over to work for Samsung. Within a year, these three had a huge impact on improving the Samsung image to its customers, brought immense experience to reshape Samsung's DRAM business into the market leader it is today. As soon as 1992 came in, Samsung had risen to the top of the (DRAM) heap, and became the market leader, never to be headed off. Where each generation of DRAM had had a different market leader from 4K to 4M, Samsung has led every generation since.