Circuits Assembly Online Magazine - Report: DRAM Price Downturn to Arrive in September

EL SEGUNDO, CA – Following a brief respite, market conditions for DRAM suppliers are set to take a turn for the worse in September, iSuppli Corp. predicts.

iSuppli previously forecasted DRAM prices would undergo a downward correction in October, following the current period of relative strength that brought an end to a phase of severe erosion in the second quarter. However, iSuppli now believes the DRAM prices will begin to decline one month earlier.

Near-term market conditions remain in a state of flux with a great deal of uncertainty in the supply chain, as suppliers and distributors continue to work off a glut of DRAM inventory, says iSuppli. Furthermore, sales momentum is waning in the DRAM spot market, as rising prices and falling supply of LCD panels cut into the available budget for memory in some PCs, the firm continues.

This is bad news for memory suppliers. Weak pricing in September will set the stage for further erosion in the fourth quarter, the researcher predicts.

iSuppli now foresees the possibility of double-digit sequential price declines in the fourth quarter, erasing any increases that aided suppliers in the third quarter. Because of this, DRAM suppliers’ profitability will dwindle in the fourth quarter compared to the third, the company says.

However, suppliers’ efforts to cut production starting in the third quarter will play an important long-term role in strengthening the DRAM market, according to iSuppli. Global annual bit growth in 2008 will amount to less than 60%, compared to the explosive 97% expected in 2007. This will help rebalance supply and demand in the market, says the firm.

Because of this, iSuppli remains optimistic about DRAM market conditions in 2008.

iSuppli still anticipates that NAND flash will undergo a downward price correction in September.

Despite all this, iSuppli is not reducing its rating of DRAM market conditions to “negative” at this time.

iSuppli predicts global DRAM revenue will rise by 17.5% next year, following weak growth of less than 2% in 2007.

There is one factor that could radically alter the outlook for the fourth quarter: the power outage that impacted operations at Samsung Electronics’ NAND flash memory manufacturing operations, adds iSuppli. This outage forced Samsung to shift some DRAM capacity to NAND.

It’s unclear how much of an impact this will have on Samsung or the overall DRAM market – but it is an important development that must be watched during the rest of the year, the company says.