According to Gartner projections, DRAM revenue will reach $33.9 billion this year, up 34 percent from 2005. But the firm expects growth to slow significantly to 15 percent in 2007, when DRAM is expected to enter into oversupply conditions during the first half of the year. Gartner does expect the second half of next year to be a period of undersupply, however. The firm projects DRAM revenue to peak in 2008, before beginning to decline in 2009.

"We expect DRAM revenue to keep growing in 2007, although support from the NAND flash market will be less of a factor because we expect manufacturers to convert production capacity back to DRAM in the coming quarters," said Richard Gordon, managing vice president at Gartner, in a statement.

During 2005, when the DRAM industry was battling mild oversupply, NAND flash was able to soak up some of the excess capacity, saving the DRAM industry from severe oversupply and a strong revenue decline, according to Gartner. In 2006, the DRAM industry returned the favor, the firm said.

The fate of these two memory technologies are intertwined because of the high participation of DRAM vendors in the NAND market, according to Gartner. In terms of megabyte shipments, 46 percent of DRAM vendors will also compete in the NAND market in 2007, Gartner said.

"The DRAM market is the most volatile sector of the semiconductor industry," said Andrew Norwood, research vice president at Gartner. "Continued changes in production allocation, fluctuating demand patterns and the unrelenting advance of semiconductor technology make this a high-risk business for suppliers and investors."

Gordon described 2006 NAND sector growth as "modest at best, compared with stellar growth for the past four years."

Norwood added that DRAM suppliers must quickly develop ability to switch capacity between DRAM and NAND. "Suppliers without this ability will be at a significant disadvantage during the next cycle," he said.

Driven largely by DRAM growth, worldwide memory revenue is on pace to surpass $60.4 billion in 2006, up 21.5 percent from 2005, Garter said. The firm expects memory to achieve slower growth of 9.8 percent in 2007, reaching $66.3 billion.

Growth in the memory sector in 2006 was twice as fast as that of the overall semiconductor industry, Gartner said. Several memory vendors, including I Qimonda, Hynix Semiconductor and Elpida Memory, substantially outperformed the market in 2006 and registered strong revenue growth in Gartner Dataquest's preliminary market share rankings, released last week, Gartner said.

By: DocMemory
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