With Intel's aggressively pushing DDR2 to be the next star, many DRAM makers have their DDR2 samples past Intel validation already and on the process of OEM customers' validation. However, as the DDR SDRAM contract prices rose to uncomfortable highs for OEMs and shortage is expected to get worse for the second half of 2004, will DDR2 delay to take the lead ?

We have thoughts as follows:

To speed up the memory system's speed transition and ensure future memory supply of DDR2, Intel invested $123 million in Elpida Memory Inc. and $450 million in Micron for future DDR development and Micron's 12-inch fab line in year 2003. The era of DDR2 SDRAM is to come eventually, many DRAM industry participants believe.But, even easier than Rambus, DDR2 still have problems to overcome.

Compared with DDR1 SDRAM, DDR2 has advantages with lower power consumption, higher speed and higher densities up to 2Gb. The DDR2 1Gb and higher devices will have 8 banks for better performance. For read latency, the eliminating 1/2 clock setting helps speed internal DRAM logic and improves yields. And its FBGA package enables better electrical performance and speed.

Sounds great ? However, if we think more, the memory system takes around 10% of whole PC system's power consumption. If its voltage reduces from 2.5V to 1.8V ( DDR1 to DDR2 ), the power consumption is down 30% which accounts 3% down only for total PC system. For notebook PC, lower power is a great issue, but DDR2's contribution is not as significant as Centrino's.

DDR2 have high- speed specification from 400MHz to 533MHz and 667MHz. However, some DRAM makers already make DDR1 500MHz to the market and are positive for DDR1 500MHz's market position before DDR2 becomes mainstream. But, Intel doesn't approve DDR1 500MHz.

Concerning high prices of DDR2, many expect server application will be DDR2's first market to win as DDR2 improves server's command bus efficiency. As Intel postponed DDR2 chipset for server, Lindenhurst from late March to June. We believe DDR2's market share projection has to be adjusted down. Besides Lindehurst, Grantsdale, the DDR2 chipset for Desktop PC is launched in May and Alviso, for notebook PC, to be launched in September.

Motherboard companies also have difficulties to launch the motherboard to accommodate varied module sockets for DDR1 of 240-pin connector and DDR2 of 184-pin connector since they are not sure what portion of market share DDR2 will take and how long the transition period will last.

If DDR2 to take more than 20% market share of total DDR SDRAM, the testing capacity shortage is expected in 2H 2004. Generally, the testing time for DDR2 SDRAM (400-450 seconds) is 30% longer than DDR SDRAM (300- 350 seconds) due to its complexity. Besides, DDR2 applies FBGA package rather than TSOP for DDR1, increasing its backend cost 20% higher than that of DDR1.

However, most DRAM makers have aggressive plan for DDR2 market. In the beginning of 2004, Samsung raise its market share projection for DDR2 to take 20% –30% of total DRAM at the end of 2004. It estimates the worldwide DDR2 output will be around 250million to 300 million units in 512Mb equivalent and Samsung will produce 140 million to 200 million units which is 50%-60% of total DDR2 output. Nanya tech. projects its DDR2 output