Analyst: DRAM poised for 2H07 rebound

August 13, 2007 – After suffering through a “painful” first half, there’s renewed optimism that the second half of 2007 will be better — or at least it has to, after the worst market deterioration since the awful year of 2001, according to a report from IC Insights.

After pricing hit “give-away” levels in May and June, evidence suggests that prices started to firm up in July and are headed upward, resulting in sequential growth through the rest of the year (see figure below).

Aside from the “nowhere-to-go-but-up” philosophy, the firm cited three reasons for being optimistic about the DRAM market in 2H07:

– PC shipments are forecast to increase 12% this year, with a 75% increase in memory/system to 1.4GB (up from 1.3GB in 2Q). And some DRAM suppliers think nearly half (45%) of systems shipped in 4Q will have 2GB of DRAM, mainly to support Microsoft’s Vista OS — although only 1GB is required for Vista, significant performance improvements are seen at 1.5GB, and even up to 2GB is recommended by some.

– Demand for specialty DRAM, driven by all three major game console platforms — Microsoft’s Xbox 360 (512MB GDDR3 DRAM), Sony’s Playstation 3 (256MB XDR DRAM), and Nintendo’s Wii (64MB GDDR3 DRAM) — and also increased DRAM content in new-generation handsets and personal mobile products. The firm forecasts an average of 28MB DRAM per cellular phone handset this year.

– Shifting capacity to NAND flash should pinch DRAM supply growth; also, yield issues are arising with DRAM makers’ “full-out migration” to 70nm process geometries, IC Insights notes.

While DRAM prices fell and suppliers staggered through 1H07, customers made out very well, stocking up on high-density parts on the cheap — and this trend is likely to continue in the second half of the year as well, IC Insights notes. DRAM shipments are forecast to touch 3.0B units in 3Q and 3.3B in 4Q, for a full-year growth of 49%, and shipments of 512MB devices will surpass total DRAM shipments in all of 2006, the firm noted. DRAM bit volume is expected to surge 81% this year, the highest since an 88% swell in 1998.


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