Chipmakers losing billions on DRAM as iPad dominates

Did you know that Apple ships more iPads than Dell ships PCs? Chipmakers that have bet their business on the global demand for DRAM chips know this and it's freaking them out.

iPads use 75 percent fewer dynamic-random access memory chips than traditional PCs. For companies like Elpida Memory and Hynix Semiconductor, this is a major problem. You see, they have been building factories to produce these DRAM chips under the assumption that the computer industry, particularly PCs, would continue to grow at its traditional rate.

The iPad has changed everything.

Over the last three years, the makers of DRAM have lost an estimated $14 billion, according to a report from Bloomberg. Not included in that number is the $37 billion DRAMeXchange spent on factories thinking the industry would continue plugging along.

After a month that saw DRAM prices hit their all-time low and the iPad cross the 11 million sales mark, these chipmakers (and their investors) have to be sweating bullets. Combine all of that with a global economy still struggling to stay afloat, and many analysts wonder if the DRAM industry will be able to recover.

Analyst Chen Liway told Bloomberg, "DRAM makers invested too much, and they bet heavily that growth of the computer industry would always continue. That would have been OK if the iPad had never come along."

The outlook for DRAM makers doesn't get better. With Apple steamrolling the global marketplace year after year the PC industry continues to miss expectations, growing only 3.2 percent (92 million units) compared with a 5.1 percent projected growth. Meanwhile the iPad is expected to top 20 million units in the holiday quarter alone, adding to the 40 million units Apple has sold since April 2010 when the product launched.

Obviously the iPad isn't going anywhere. Chipmakers will have to adjust their business plans to keep profitable in the coming years as the iPad (and perhaps other tablet devices) become more and more popular. Companies like Samsung have been able to diversify their chip manufacturing operations to provide specialty chips for mobile devices and remain profitable.

I imagine the likes of Elpida and Hynix will try and follow suit in the coming years. Are you trashing your PC for an iPad or other tablet device? Let me know in the comments!