May 9, 2007 – Excessive investment in DRAM production capacity could send memory market prices even lower, according to a Japanese exec with ties to Samsung, who warns that an undersupply of NAND flash memory could occur later in the year.

In an interview with Nikkei Business Daily, Shizuka Ishikawa, president of Samsung partner Tomen Devices Corp., says that not only have memory prices been dented by inventory stockpiles, but sample shipments of new low-cost chips have been delayed as well. Large-lot prices for DRAM chips are down to around $3/unit now, about half where they were last year, because of tepid response so far to the Vista OS, he noted.

Are semiconductor makers investing too heavily in DRAM? Ishikawa said that further price erosion is indeed a possibility, since many memory suppliers including Samsung plan to nearly double their DRAM bit growth this year vs. a projected overall 60% DRAM bit growth. This fate won’t be known until after this summer once the ramp begins for back-to-school systems and pre-holiday planning. Cheaper DRAM means more PCs will encompass 1GB or 2GB of memory, and if prices stay around the present level “it will not impose too heavy a cost burden on PC makers,” he told the paper. Initial Vista-ready PCs were priced around 30,000 yen (US $250) higher than comparable XP-based models, but that gap has narrowed to around 10,000-20,000 yen (~$80-$160), he noted, making it a more palatable upgrade for consumers.

Asked about rumors whether Samsung is delaying equipment orders for its DRAM expansion plans, Ishikawa said he didn’t know if those rumors were true, but he believes Samsung is still fully committed to maintaining its top memory marketshare position and “will no doubt continue making capital investments,” even if it proves true that the company has to delay purchases “for several months.”

Ishikawa attributed a recent upswing in NAND flash memory prices (8GB NAND prices were back to around $8 in April, up from $5 in Feb and nearly back to December levels) to the end of inventory workdowns and renewed demand for Apple’s iPod and iPhone. But he added that he doubts Samsung will change direction and boost NAND flash memory production at the expense of DRAM output, noting that the process technologies used for NAND and DRAM are too different to risk “a change so drastic.” Elsewhere, LCD modules for laptops are also picking up (~$100/unit in April), he noted, but panel makers competing against Samsung are cutting output and threatening another price war, he told the paper.