[Chiptok] DDR5 Heated by AI Popularity... How Far Has Market Penetration Reached?

With the surge in demand for data center servers driven by generative artificial intelligence (AI) such as ChatGPT, the memory industry is accelerating the transition of DRAM, primarily Double Data Rate (DDR)4, to the next-generation DDR5. The success of the memory semiconductor industry hinges on how quickly the market penetration rate of DDR5, emerging as the next-generation DRAM standard, can be increased.

Samsung Electronics' 5th generation 10nm-class DDR5 DRAM

On the 5th, the semiconductor industry estimated the DDR5 penetration rate in the DRAM market to be around 10%. DDR4, the previous version, still dominates the market. DDR5 refers to the fifth upgrade of the DDR DRAM technology standard since its launch in 2001. It offers faster data transfer speeds and lower power consumption compared to DDR4. According to global market research firm Omdia, DDR4 will remain dominant until this year, but from at least next year, DDR5 shipments will surpass DDR4, leading to a generational shift.

Omdia projected that DDR5’s market share, which was about 3% last year, will rise to 12% this year, 27% in 2024, and 42% in 2025. Conversely, DDR4, which peaked at 53% last year, is expected to sharply decline to 36% this year, 23% in 2024, and 8% in 2025. More optimistic forecasts have been made for the domestic market. Youngmin Ko, a researcher at Shinhan Investment Corp., based on Omdia statistics, predicted DDR5 penetration rates of 26% by the end of this year, 35% in the first half of 2024, and 48% by the end of 2024. The increase in AI investments is driving demand for high-capacity DDR5 products, which is expected to rapidly expand DDR5 penetration.

While overall DRAM prices have plummeted since the second half of last year, DDR5 prices remain higher than DDR4 and have experienced less price decline. Omdia forecasted that prices for DDR4 PC (8GB) and server (32GB) modules, which were $18.50 and $84 respectively in Q4 last year, will drop to about $12.80 and $60 by the end of Q2 this year. DDR5 PC and server modules, priced at $22 and $108 respectively in Q4 last year, are expected to fall to $14.30 and $74 by the end of Q2 this year. Although prices for both DDR4 and DDR5 are declining, the nature of the price drops differs significantly.

SK Hynix's 5th Generation 10nm-class DDR5 DRAM

An industry insider explained, "The price decline of DDR4 general-purpose products is due to supply-demand imbalance, but DDR5’s price drop should be understood as a reduction in premium as the cost structure improved since the initial product shipments." They added, "Even if memory semiconductor companies cut production to reduce the price drop of DDR4 general-purpose products, DDR5 is not subject to production cuts." Another market research firm, TrendForce, recently reported, "DDR5 is the only product most likely to end its price decline and start a rally (price rebound)," noting that "at the end of May, two Korean suppliers (Samsung Electronics and SK Hynix) attempted to raise DDR5 product quotation prices."

Korean semiconductor companies, which dominate the memory semiconductor market, are accelerating the transition to DDR5. Samsung Electronics and SK Hynix, which produce DRAM, have completed the development of the most advanced 10-nanometer (nm; 1 nm is one-billionth of a meter) class 5th generation DDR5 technology and are moving into verification and mass production, preparing for full-scale shipments.

Samsung Electronics has started mass production of 16Gb (gigabit) DDR5 DRAM using the industry-leading 10nm-class 5th generation process. Compatibility verification based on the AMD platform was completed in December last year. Compared to the previous 14nm-class product, productivity has improved by 20%, enabling more memory production per wafer. The maximum operating speed supports 7.2Gbps (7.2 gigabits per second), capable of processing two ultra-high-definition (UHD) movies of 30GB capacity each per second. Power consumption has improved by 23% compared to before, delivering stable operational performance.

SK Hynix recently provided DDR5 equipped with 10nm-class 5th generation technology to Intel and has entered the verification process of the ‘Intel Data Center Memory Certification Program.’ This is an official certification procedure for memory product compatibility used in Intel’s server platform, the Xeon Scalable platform. The DDR5 product provided to Intel this time was adjusted to operate at Intel’s required speed of 6.4Gbps, increasing speed by 33% compared to the early DDR5 prototype which operated at 4.8Gbps.