Concentration on memory chip can affect mobile phones

The memory chips of smartphones and personal computers (PCs) may be invisible to consumers, but this situation hides his importance. They are so important that the Chipmakers are engalfinhados for years in a brutal competition that leaves the weakest by the way.
Now, a handful of remaining important manufacturers are reducing their expandability-a decision with problematic implications for some customers of the Smartphone industry, which had been taking advantage of the abundant supply of memory chips decreasing costs.
The competitive field for the two main forms of memory-D-Ram and Nand Flash-has shrunk dramatically over the past five years. Only Samsung Electronics, SK Hynix and Micron have today more than 90% of the market for D-Ram memories, according to analysts at Bernstein. Almost 100% of the market for Nand Flash memory is divided between the dominant competitors in the segment D-Ram with Intel, Toshiba and SanDisk. "The industry is turning into an oligopoly," says Avril Wu, an analyst at DRAMeXchange consulting. "There are fewer suppliers by controlling the amount available ..."
The consolidation of manufacturers was partly a result of aggressive expansion demonstrated capacity in recent years. This led to overproduction of memory chips that brought down prices and undermined fatally weaker manufacturers-especially the Elpida of Japan, acquired by Micron last year.
But the remaining groups have changed dramatically: analysts do not believe in the introduction of new production capacity of memory chips this year. This contention can feed prices. The demand is increasing, despite the decline of the PC market, thanks to the growth of smartphones, with ever-increasing memory capabilities.
The price of a given quantity of D-Ram memory-seen as a relatively simple commodity in terms of semiconductor industry-usually falls every year. But the pace of decline in eight categories D-Ram memory used in mobile devices will fall to 23.9% this year, compared to 38.8% in the past year, according to a study by DRAMeXchange suggests.
The expectation is that the cost of some D-Ram chips used in PCs can almost double over the course of the year, since manufacturers are changing the production lines to meet the demand of the Smartphone industry. Prices of Nand Flash memory chips may increase up to 17%.
"Prices will continue strong this year," said Kim Jung-soo, Vice President of SK Hynix, which last month released its third quarterly net profit in a row after a year of losses. "We believe demand for chips used in mobile devices will increase, while the supply of memory chips will be tight because of limited capacity."
Analysts say that a change in priorities of Samsung-by far the biggest memory-chipmaker had a weight on it. "Before, a strategy to destroy competitors in the area of memory chips with creating an oversupply made sense, but not now," says Mark Newman of Bernstein, noting that Samsung's smartphones business replaced its Semiconductor arm as the main driver of profits. "Today, the main competitor of Samsung is Apple, and bring down the prices of memory chips would benefit only his rival."
A change in the long run for most investments contained of Chipmakers may have a small impact on the margins of the major handset manufacturers, such as Apple: normally, the memory chips account for about a tenth of the cost of production of a smartphone.
This may already be causing headaches for the Samsung, which considers the possibility of resorting to SK Hynix memory chips to meet strong demand for its new smartphone Galaxy S4. "The staff of memory chips from Samsung noticed this huge demand [in the area of mobile devices] at the beginning of the year. They did not have enough time to prepare, "says CW Chung, an analyst at Nomura.
The strong business relationships and power on the market of the major smartphone makers can ensure access to memory chips, even amid anticipation of a tightening of supply in the second half. This may not apply to Chinese manufacturers of "second line", whose low-cost smartphones are selling well among China's poorest.
Companies such as Huawei and Lenovo have "a greater bargaining power", but smaller manufacturers may not get D-Ram memory chips in sufficient number, which will force to reduce the production or storage capacity of each device, according to Andrew Lu, an analyst at Barclays. This may be good for Samsung handsets division, which-as well as Apple-comes suffering a strong corrosion of its participation in the largest market of smartphones in the world.