Wednesday, July 13, 2005
Reduced growth in DRAM bit production will generate greater price stability and improved market conditions for DRAM suppliers in the third quarter, according to market research company iSuppli Corp. (El Segundo, Calif.).
Many suppliers' DRAM operations are expected to suffer losses in the second quarter and so, in order to stanch the flow of red ink, suppliers are expected to slow production increases and hold the line on contract price cuts in the second half, according to Nam Hyung Kim, principal analyst covering DRAM for iSuppli. This will counteract the impact of a continuing overhang in DRAM inventory.
Furthermore, the number-one and number-two suppliers, Samsung Electronics Co. Ltd. and Hynix Semiconductor Inc., have been aggressively shifting production from DRAM to more-profitable NAND flash memory.
Due to demand weakness in the first half of the year, iSuppli said it believes overall DRAM revenue growth will remain essentially flat in 2005, rising to $26.5 billion, up from $26.4 billion in 2004. DRAM bit production growth of 52.7 percent will cause average selling prices (ASPs) to decline by 34 percent in 2005, slightly more than iSuppli predicted in the second quarter.
Because sequential bit growth in the first quarter was very high, at 15 percent, quarterly bit growth from the second through fourth quarters will remain within a single-digit range, thus spurring greater price stability.
Prices for 256-Mbit Double Data Rate (DDR) SDRAMs could decline to $2 because the market leaders' production costs for the memory is lower than that level, iSuppli said. However, increasing use of more expensive, next-generation 512-Mbit DDR2 will offset declines in 256-Mbit DDR pricing, resulting in overall price stability in the third quarter.
DDR2 DRAM devices captured 17.2 percent of worldwide sales in the first quarter, with the bulk of the remainder accounted for by first generation DDR memories. However, there now is no price premium for DDR2 compared to equivalent-density DDR in OEM contract negotiations.
This will allow DDR2 penetration in the PC OEM market to increase to 49 percent by the fourth quarter of 2005, iSuppli predicted.
Despite this, iSuppli does not foresee a major DRAM price rebound in the near term. Prices instead will move within a narrow $1 range in the third quarter, iSuppli said.
By: DocMemory
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