Elpida, Japan's only DRAM vendor, made a $144m operating loss in its first fiscal 2009 quarter which finished at the end of June. It thinks it will post another thumping $144m operating loss for its second fiscal 2009 quarter as well. Times are hard: It made an operating profit of $57m in the same quarter a year ago.

There is a DRAM supply glut which has been worsened by the failure of Windows Vista to spark memory increases in PCs, and which has not been eased by the rise of netbooks and by mobile phone sales.

Elpida and the other DRAM vendors cut prices to keep their fabs operating and to be well-positioned when an upturn came. But it did not come, and prices plummeted. Elpida's CFO, Toshiaki Hagiwara, called the price decrease a "huge plunge". The company raised its DRAM prices 20 per cent in March but even so it operated at a loss.

As the DRAM demand slump continued manufacturers have reduced capacity to reduce their costs and their losses.

This is ongoing. Powerchip Semiconductor has said it will reduce its DRAM volume by 10 to 15 per cent. Elpida is cutting production output at its Hiroshima plant by 10 per cent from the middle of this month. Some sources suggest the only realistic way for the DRAM industry to return to stability and profits is if a vendor exits the industry, but there are no signs of that yet.

Elpida now thinks there will be an upturn next year, but not much of one - PCs and servers aren't showing as much memory growth as in the past, but even this limited growth will enable reduced capacity fabs to ship chips at more realistic prices. Bust is turning to boom-lite.

Yukio Sakamoto, president and CEO of Elpida Memory Inc, revealed his views on the future of the DRAM industry at the company's business presentation for analysts Sept 9, 2008.

Commenting on the current status of the DRAM industry, Sakamoto said, "Two years will have passed by the end of the next quarter (the October-December 2008 quarter) since the ongoing slowdown began. Such an extremely severe situation has never continued for two years before."

He also indicated his view on DRAM demand, saying, "The growth rate of bit demand will slow down from now." He said it is because "the growth of a DRAM volume per PC and electronics sales will both lose momentum."

Sakamoto, however, predicted DRAM supply will slow even more than the demand.

"(Due to the sluggish DRAM market), DRAM manufacturers have implemented almost no new capital investment for the past one year," he said. "At this moment, DRAM manufacturers aren't spending any capital to increase 50nm-generation production capacity and are only applying flash memory lines to DRAM production."

Taking these factors into consideration, "The DRAM market is expected to improve in the first half of 2009," Sakamoto said.

By: DocMemory
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