Severe declines in logic pricing will slow in 2004, as pressure on profitability forces suppliers to evaluate their positions in the market, says iSuppli Corp.

"Logic is one of the most contested markets in the standard component arena and now has claimed its first casualty with Fairchild Semiconductor withdrawing from the standard bipolar logic market," Roger Banks, iSuppli market analyst, stated in the market research company's weekly newsletter. "This leaves Texas Instruments as the only broad-line bipolar logic supplier."

Price declines for standard bipolar logic will slow and possibly reverse in some parts of the world where remaining suppliers have little or no presence, Banks said.

While there has been strengthening demand resulting in tightening capacity in some markets coming into the holiday season, that hasn't been the case in standard logic. "There appears to be adequate capacity available to meet the expected demands through most of 2004," Banks said.

Meanwhile, in the DRAM market, there is growing optimism about market prospects in 2004, although it is tempered by concerns over a lack of a technology or density transition next year, according to iSuppli analyst Nam Hyung Kim.

The market research company met with suppliers Samsung, Infineon, Hynix, ProMOS and Powerchip during an October trip through Asia and Europe. "Many of these suppliers revealed plans to increase production, to boost sales and reorganize operations to capitalize on market growth," Kim stated.

Korean DRAM giant Samsung Electronics will accelerate its ramp of 300mm production and increase its bit supply, while Infineon also plans to increase its 300mm wafer DRAM production at Inotera, its joint venture with Nanya Technology Corp. ProMOS, a former joint venture between Infineon and Mosel Vitelic from which Infineon withdrew, will be aggressively promoting DRAM sold under its own name in 2004, and is getting its chips qualified at PC maker Dell Inc.

"Sentiment among the DRAM makers was uniformly optimistic, with all agreeing that demand will generate strong bit growth in 2004," Kim wrote. "However, the suppliers expressed concern regarding whether the type of DRAM being sold in 2004 can continue to deliver the kind of revenue growth they've seen in 2002 and 2003."

While there is no technology shrink or density transition taking place for DRAM next year, iSuppli expects overall DRAM prices to decline only 15 percent to 20 percent in 2004, below the average historical rate of 35 percent and below the 26 percent posted this year. DRAM revenue will reach $21.2 billion, up 26.9 percent from 2003.

But for such a scenario to take place, bit supply will have to rise by 50 percent next year, iSuppli cautions. "Although increasing demand will offset potential supply issues, DRAM makers should be aware of potential challenges in the market," Kim said.

By: DocMemory
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