November 14, 2007 – Oversupply of parts in NAND, coupled with slower-than-expected seasonal demand for DRAM, have prompted industry analyst firm iSuppli to downgrade its outlooks for both memory segments.
Global ASPs for 512Mbit equivalent-density NAND flash is seen declining 24% in 4Q, after two quarters of improvement (8% in 3Q, 6% in 2Q). The reason: an oversupply of parts, mainly due to Korean memory chipmakers shifting their production capacity from DRAM to NAND, notes Nam Hyung Kim, director and chief analyst for memory ICs and storage systems at iSuppli, in a statement. The rebound in 3Q pricing was unsustainable because they were caused by reduced supply growth, not increased demand, he notes, and he sees no near-term recovery in NAND conditions as the year-end holiday seasonal demand comes to an end.
The DRAM sector hasn’t had a good year at all, and things are staying that way, according to the report, which quips that “about the only good thing to say about the DRAM market right now is that it couldn’t get much worse.” Market prices have fallen below cash costs, and 512Mbit density DDR2 DRAM prices have collapsed — less than $1 in the Asia spot market — which will extend DRAM chipmakers’ losses into 4Q and probably 1Q08, for four consecutive quarters on an average basis.
There’s hope for some optimism, though, since the DRAM market seemingly can’t get much worse. iSuppli says the DRAM segment should start to recover slowly next year, with firms finally seeing some profits by 2Q08. Demand “will be driven by the supply side, with inventory dwindling and growth in bit production decreasing,” tightening availability and inflating prices, Kim writes. This scenario, he adds, assumes rational behavior from the memory firms, though, and no massive production increases again.
iSuppli says the NAND sector won’t be as resilient, with conditions continuing to worsen until 3Q when a margin crossover with DRAM production occurs. It’s a flip of the scenario seen one year ago (4Q06), when strong DRAM profits prompted suppliers to aggressively hike DRAM output and cut back NAND production — causing NAND prices to rise and DRAM prices to fall.