Analyst recasts shadowy gaze on DRAM, NAND markets

October 9, 2006 – Just a month after upgrading its outlook for the DRAM market, analyst firm iSuppli Corp. says the storm clouds are gathering again — and the NAND flash outlook isn’t looking great either. The firm has recast its outlook for the DRAM segment to “neutral” from “positive,” while the NAND flash memory is back down to “negative” from “neutral,” according to Nam Hyung Kim, director and principal analyst.

Kim points to data suggesting DRAM prices peaked in September, ending a solid quarter of increases, while improved prices, inventories and other market trends contributed to a two-year high in the overall climate for DRAM producers. However, memory firms have started swapping NAND capacity back to DRAMs to take advantage of rising prices (and promise for better profits), and production of DDR2 SDRAM is increasing among suppliers. This will lead to higher supplies and lower prices, according to the El Segundo, CA-based firm, which predicts a 7% sequential decline in 4Q06 for DRAM average selling prices.

iSuppli still projects 2006 will be better-than-expected for the DRAM segment, with worldwide revenues growing 24% this year, followed by 16% growth in 2007.

Meanwhile, in the NAND flash segment, a seasonal price rally due to chipmakers’ holiday ramp is expected to peter out by the end of October, and prices will come back down again, the firm predicts. Also weighing down the NAND flash segment is a letdown from heavy influencing customer Apple Computer Inc., whose new iPod MP3 player incorporates only modest feature upgrades, instead of the “groundbreaking” advancements NAND suppliers had hoped would drive more memory sales. The lack of a new “killer app” in the near term will limit NAND market growth, according to iSuppli, which projects 17% revenue growth this year, followed by 13% in 2007.

While pricing and demand are coloring iSuppli’s memory market outlooks, the biggest factor determining the state of both the DRAM and NAND markets is the amount of production capacity that DRAM suppliers devote to NAND. DRAM makers control 78% of global NAND capacity, giving them a huge influence over availability, pricing, and inventory levels. “iSuppli’s next upgrade or downgrade for NAND and DRAM will depend greatly on the production decisions made by DRAM suppliers in the near future,” the firm said, in a statement.


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