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iSuppli: Memory market recovery not imminent

Posted: 27 Apr 2009     Print Version  Bookmark and Share

Keywords:memory chip  NAND prices  DRAM price  market recovery 

According to iSuppli Corp., while overall memory chip prices are expected to stabilise during the remaining quarters of 2009, a true recovery in demand and profitability is not imminent.

After a 14.3 per cent sequential decline in global revenue in the first quarter, the market for DRAM and NAND flash chips will grow throughout the rest of the year, iSuppli predicted. Combined DRAM and NAND revenue will rise by 3.6 per cent in the second quarter, and surge by 21.9 per cent and 17.5 per cent in the third and fourth quarters, respectively.

"While this growth may spur some optimism among memory suppliers, the oversupply situation will continue to be acute," said Nam Hyung Kim, director and chief analyst for memory ICs and storage at iSuppli, in a statement.

Many memory chip suppliers are attempting to paint a more optimistic picture of the memory business by prematurely talking up a potential market recovery, iSuppli said.

Global quarterly DRAM and NAND revenue forecast

Global quarterly DRAM and NAND revenue forecast (Click to view full image)

In DRAM, the imbalance between supply and demand is far too great for the market to recover profitability in short order, Kim said. He added that shipments of equivalent 1-Gbit density DRAM will exceed demand by an average of 14 per cent in the first three quarters of 2009, preventing the strong price recovery required to enable most memory suppliers to achieve profitability.

"Even if all of the Taiwanese DRAM suppliers idled all their fabs, which equates to 25 per cent of global DRAM megabit production, the market would remain in a state of oversupply," Kim said.

DRAM suppliers have been cutting capacity, but must still wait for fundamental demand recovery, according to iSuppli. The firm believes that another round of production cuts will take place in the second quarter, which will positively impact suppliers' balance sheets late this year or early in 2010 at the earliest.

DRAM prices now amount to only one-third-level of Taiwanese suppliers' cash costs, iSuppli said. Unless prices increase by more than 200 per cent, cash losses will persist for these Taiwanese suppliers, the firm said. The average megabit pricing for DRAM is projected to rise in every quarter of 2009, but not remotely enough to allow suppliers to generate profits, iSuppli said.

NAND puzzle
The NAND picture is more confusing, iSuppli said. Pricing for NAND since January has been better than the firm expected, but iSuppli said it does not believe signals a real market recovery.

Thanks to the current NAND price rally, the leading supplier, Samsung Electronics Co. Ltd, is close to break-even costs on NAND prices, iSuppli said. But the other suppliers continue to lose money, the firm said.

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