The insolvency of Germany's Qimonda will offer some relief for the DRAM market, which is still set to shrink in 2009 for the third year in a row, analysts said.

Qimonda controls about 10 percent of the 25 billion a year market and analysts said the insolvency filing was likely to ease the pricing pressure on the struggling sector.

"Other DRAM makers will likely split Qimonda's market share, and since all companies, including Samsung, are in the red, they would not likely cut prices further to grab market share," said Mizuho Investors Securities analyst Yuichi Ishida.

"But demand will likely be even weaker in 2009, so that would be more of the issue."

Prices for DDR2 1Gb chips, used as the main memory chip in many personal computers, could rise from below $1 currently to $1.20-$1.50, which is the cash cost for vendors, said DRAMeXchange, a leading price-tracking organization for the industry.

The research firm said there was "high possibility" for a 10-percent cut in the global supply of DRAM chips as long as other vendors stick to their capacity cut plans.

"Output cuts have helped the market condition to turn a little bit better and it will probably get better some more toward February, but for the whole of 2009, there is a chance that PC demand will stall," Mizuho Investors' Ishida said.

"The downturn has bottomed out for now, but it does not look like the market condition will keep getting better."

According to preliminary estimates from research firm iSuppli, global DRAM revenue fell by 19.8 percent in 2008 to $25.2 billion, the second year of decline, and is expected to drop another 4.3 percent this year.

By: DocMemory
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