January 5, 2007 – DRAM sales are set to reach their second-highest level ever in 2007, second only to the peak year of 1995, but year-on-year growth will be stunted due to price erosion, according to analyst firm iSuppli Corp.

Sales are projected to reach $36.95 billion, vs. $33.20 billion in 2006, but growth will slow from nearly 34% to just 11%, noted principal analyst Nam Hyung Kim.

The main culprit in the slowing growth: normal DRAM price erosion. The past year witnessed “abnormal conditions” for DRAM pricing with just a 13% annual decline, well below the historical 30% decline, as memory makers diversified product lines into specialty DRAMs for non-PC applications, Kim noted. That meant DRAM bit production growth rose 52%, but non-PC supply growth was much higher than PC DRAM supply growth, creating greater price stability.

Also softening the DRAM price erosion was a shift away from DRAMs to NAND-type flash — a segment that saw severe price declines during 2006 (some estimates figure a 50%-60% decline).

In 2007, Kim expects DRAM price erosion to return to a more normal 31%, with 65% bit production growth, as seven new 300mm DRAM wafer fabs are slated to ramp up to production. Decelerating NAND market growth will slow memory firms’ shift from DRAM to NAND capacity, helping boost DRAM availability and pushing down pricing.

Still, a return to normal price patterns isn’t bad news for memory firms. “Any year when market revenue exceeds $30 billion should be greatly appreciated by DRAM suppliers,” who will also enjoy healthier margins this year, said Kim, in a statement. He added that NAND demand is still a wild-card factor for the memory market’s health, with potential impact from Apple’s upcoming flash-based personal media players (PMP) and its long-rumored iPhone.

Global DRAM market forecast, 2004-2010
(Revenue in US $B. Unit shipments in millions, 256Mb equiv)

………………….2005……..2006………2007………2008………2009………2010……..CAGR (05-10)

Revenues…..24.815…..33.201…..36.952…..39.567…..35.924…..38.189……….9.0%

Unit
shipments………7.444…..11.396…..18.469…..27.130…..41.988…..62.618……..53.1%

Source: iSuppli Corp.