DRAM ASPs (average selling prices) will climb significantly in 2010 on high demand and lower supply, according to IC Insights.

The report is based on the theory that DRAM manufacturers are "severely overreacting" to the current downturn in the DRAM market. This overreaction has encouraged slashed capital spending outlays that will leave the DRAM producers unable to meet strong demand in 2010 and 2011, the market researcher projected, adding that the result will be surging ASPs for DRAM beginning in 2010.

The DRAM market has a history of extreme volatility, littered with spending and supply-demand imbalances. IC Insights notes in its report that although the DRAM suppliers made some strides toward evening supply and demand out in the early 2000s, in 2006 and 2007 they reverted to their past "bad habit of overspending for new production facilities." That overspending resulted in the "disastrous conditions" currently being felt in the DRAM market, which is forecast to decline more than 20% this year.

According to IC Insights, "the ingrained overreaction personality of the DRAM producers is once again coming to the forefront" and DRAM producers are budgeting to spend 12% less on capital expenditures in 2008-2009 than they spent in 2004-2005.

"We have seen the result of such conservative capital spending outlays with what happened to the DRAM market in 2006," IC Insights cautioned. "After the global recession-induced slowdown in 2009, pent-up demand for DRAM-rich electronic systems in 2010 and beyond is highly likely to cause DRAM unit prices to surge (this surge could actually begin in the second half of 2009). This jump in prices will once again give the DRAM producer renewed confidence, leading to moderate increases in DRAM spending in 2010 and big DRAM capital expenditure increases in 2011. Of course, the size of the capital expenditure outlays in 2010-2011 will determine how long the DRAM market 'recovery' lasts the next time around."

By: DocMemory
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