May 29, 2008 – Fundamentals in the memory industry are stable and “incrementally improving,” with DRAM prices rising again and NAND flash demand seen improving in general, according to analyst firm FBR Research. The next big market indicator is rapidly approaching, in the late-June timeframe with an update of devicemakers’ back-to-school build rate schedules.

DRAM fundamentals have been improving since late March, write analysts Mehdi Hosseini and Rafi Hassan. PC unit shipments seen growing 10% in 2H08 vs. 1H08, and “box loading” (DRAM content/PC) is seen rising 20%, leading to a more balanced supply/demand environment by year’s end (see Figures below). “We expect the overall bit capacity to increase by at least 60% in CY08, while bit demand increases by 55-60%,” they say. Increased DRAM unit shipments (and assuming stable prices and improving margins) should give DRAM manufacturers a reprieve in sales and profits, and they should start planning for their 55nm migrations (including immersion lithography tools) by late 2008.

Meanwhile, uncertainty persists in the NAND flash sector and unit growth projections for 2Q seem soft, but any weakness seems limited to the card segment, according to the FBR analysts, citing feedback from substrate vendors. Prices have held steady since March, “a trend that is expected to hold,” they say. Similar to the DRAM sector, migrations to 55nm should take place in late 2008 and to 45nm in 2009, which should help NAND chipmakers’ profit margins.

Apple is still maintaining its target of 11M shipments of second-generation iPhones, which should further help stabilize NAND flash prices, they note.

The next beacon to gauge the memory markets: late June, when companies update their build rates for PCs, handsets, and other electronic devices for the back-to-school season, they write.

Figure 1: DRAM industry supply/demand model.

Figure 2: DRAM industry supply/demand model, bottom-up.