Leading memory chip firm Nanya Technology was unable to reverse its losses in 2024, with company president Pei-ing Lee noting lackluster performance in terms of products for PCs, smartphones, and consumer electronics. Exceptions to the gloom were strong AI-related demand and healthy demand in the DDR5 market.
Nanya began the tape out of its second-generation 10nm-class (1B) process DDR5 chips in the fourth quarter of 2024, and DDR5 cost efficiency is expected to surpass 20nm-process DDR4 by the first quarter of 2025. DDR5 chips will eventually account for 30–50% of total bit production, as product yields improve and more production capacity is converted to the new process.
Although quarterly losses increased in the third quarter, the company's operational performance in its core business was roughly on par with the second quarter. Due to seasonal effects, the fourth quarter is likely to see steady or slightly better performance compared to the third, although it is still some distance away from breaking even.
The current high demand for DDR5 in the market is a boon for sales numbers, even with higher costs related to the initial production of the new process. With an expected 30–50% increase in bit prices, DDR5 chips are expected to achieve higher cost efficiency than 10nm-process DDR4 by the first quarter of 2025.
Even though AI-related demand remains robust, accounting for as much as one-third of total market demand, Lee notes that most of these products are supplied by the world's three leading memory manufacturers. Meanwhile, weaker-than-expected end-user demand, regional economic slowdowns, and ongoing conflicts will continue to impact the need for DRAM in PCs, smartphones, and other consumer electronics, which roughly account for 60% of overall demand.
Even though the AI server market has helped drive DDR5 demand, and high-end AI-enabled devices often come equipped with more DRAM, sales of low-end and mid-range smartphones have remained low, AI PCs have yet to gain significant traction, and the consumer electronics market is not likely to recover in the short term.
DDR5 to top Nanya's priority list
Amid the gloominess, Lee mentions that Nanya's leading priority is to bring products using its new processes to the market quickly. 8GB DDR4 and 16GB DDR5 chips using the second-generation 1B process will begin mass production as scheduled, with the goal of reaching more than 15% of capacity by the end of the fourth quarter.
As the three leading memory manufacturers and major suppliers increasingly seek to convert capacity toward high bandwidth memory (HBM), DDR5, and advanced processes, inventory destocking will continue for conventional DDR4, LPDDR4, and DDR3 DRAM products.
This inventory reduction may now take longer than originally forecast since the production crowding effect expected in the fourth quarter is less substantial than originally anticipated. Lee believes that another quarter of observation is needed for a more clear-cut picture of supply and demand in the first half of 2025, especially with the fierce competition among the two leading Korea-based DRAM makers.
For 2025, Nanya expects to roll out LPDDR4 and LPDDR5 products based on the 1B process and continue the development of its third-generation 10nm-class (1C) process. The key here lies in improving the yields and stability of these new processes as production ramps up, says Lee.
Bit output with the 1B process is expected to reach 25% of full capacity if yields improve to 70–80% and tape out reaches 15% of total capacity. If tape out reaches 30% of total capacity, then bit output will be as high as 50% of full capacity.
Even though bit shipments in the third quarter slid by more than 20% compared to the second, with no clear rebound in terminal demand in sight, Nanya will continue to shift capacity to the newer DDR5 process for known good die (KGD) shipments. This conversion will increase in the first quarter of 2025, with inventory pressure addressed through production adjustments.
