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Firm cuts NAND forecast, raises DRAM outlook

Posted: 30 Mar 2006     Print Version  Bookmark and Share

Keywords:Mark LaPedus  iSuppli Corp.  NAND  flash memory  DRAMS 

In a major turn of events, iSuppli Corp. has cut its forecast for the NAND-based flash memory market in 2006, but raised its outlook for DRAMs.

Not long ago, NAND flash was hot, while DRAMs were in the tank. Now, NAND flash memory sales will rise more slowly than expected in 2006, while the DRAM market will show surprising strength, causing the combined segments to expand by nearly 13 per cent for the year, according to the market research firm.

DRAM and NAND, which represent the two largest segments of the semiconductor memory market, together are expected to achieve revenue of Rs.1,77,885 crore ($40.2 billion) in 2006, up 12.9 per cent from Rs.1,57,530 crore ($35.6 billion) in 2005. This compares to 7.5 per cent growth in 2005, said iSuppli.

Citing a slowdown in the MP3 market and other factors, the firm has cut its NAND flash market revenue forecast to Rs.61,065 crore ($13.8 billion) this year, down from its previous prediction of Rs.70,800 crore ($16 billion). On the other hand, growth will fall short of iSuppli's previous forecast of a 49 per cent expansion, the global NAND market still will rise by 28 per cent in 2006, up from Rs.47,347.50 crore ($10.7 billion) in 2005, according to the firm.

"Recent price declines have spurred pessimism regarding NAND flash pricing and revenue growth in 2006," said Nam Hyung Kim, principal analyst with iSuppli, in a statement. "The main reason iSuppli is maintaining a positive view is that growth in the NAND flash market is not driven by trends in pricing, but rather by the explosive expansion in unit shipments."

Kim said that he expects another 55 per cent ASP decline this year, making it likely that suppliers will be profitable once again in 2006. However, operating margins will decline as competition intensifies.

The Q1 NAND slowdown had been expected, due to the highly-seasonal nature of demand from the consumer-electronics market, especially MP3 players. U.S. retailers in mid-December held zero inventory of Apple Computer Inc.'s iPod nano player, due to soaring sales during the holiday season. However, with holiday demand over, retailers have built up significant stockpiles of the device, which caused Apple's shipments to slow and its demand for NAND flash to fall short of expectations in the Q1.

In contrast, DRAM enjoyed price increases in early 2006. Unfortunately, the price rally fizzled this month, which will make it difficult for suppliers to raise prices in April, according to the firm.

Still, reflecting improved business conditions, iSuppli has raised its forecast of DRAM sales so that revenue now is expected to rise for the year. Worldwide DRAM revenue is expected to rise to Rs.1,16,820 crore ($26.4 billion) in 2006, up 6.2 per cent from Rs.1,09,740 crore ($24.8 billion) in 2005. The firm previously expected a five per cent contraction in DRAM revenue for the year.

- Mark LaPedus
EE Times

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