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Prices drop despite memory IC production cuts

Posted: 19 Sep 2008     Print Version  Bookmark and Share

Keywords:production cutbacks  memory chip makers  spot pricing  oversupply 

Despite the announcement of production cutbacks by several memory chip makers due to continued weakness in the market, DRAM and NAND flash devices' spot pricing is still sliding, according to market research firm Gartner Inc.

Elpida Memory, Powerchip Semiconductor and Hynix all have recently announced cutbacks in production volumes in response to continued weakness in the memory market and oversupply conditions due to excessive investment in new facilities, said Gartner.

Powerchip announced a 10 per cent to 15 per cent cutback in 300-mm DRAM production levels, while Elpida announced similar cutbacks in DRAM production. These cutbacks reduce worldwide supply by about 2.3 per cent, according to Gartner. The market researcher noted that it's unlikely that the industry will experience any shortages in the fourth quarter of 2008 with or without these reductions.

In the NAND arena, Hynix confirmed that is it cutting back production in the M8 and M9 200-mm fabs, both of which had been slated for closure, confirming that it's not cost-effective to continue memory production on 200-mm wafers, said Gartner.

In addition, Elpida and Powerchip had already dramatically reduced their 2008 capital spending compared with 2007 levels, said Gartner. Elpida dropped its 2008 capex to about 40 per cent of the prior year and Powership's capex hit 40 per cent of 2007 spending. Upshot: Don't expect a quick recovery in the capital equipment markets, unless these announcements lead to a more favourable pricing environment then it could drive expansion plans scheduled for late next year, said Gartner.

Spot pricing for leading-edge DRAM devices was down again last week, and average spot pricing across all densities and technologies was down 0.8 per cent compared with the previous week, at Rs.74.15 ($1.73) on a 1Gb equivalent basis.

DRAM pricing is close to reaching cash cost, said Gartner, which means manufacturers will have to scale back production or burn money, and given the current market conditions, similar action by other vendors will need to be taken to make a difference.

In the NAND flash market, pricing dropped 1.9 per cent across all devices last week except for the 16Gb SLC. The lower prices were led by the commodity 8Gb MLC parts, and the 16Gb MLC part, whose low-end price range fell to Rs.89.57 ($2.09). On a weighted 1GB average, spot prices sank more than 3.9% to stand at Rs.58.29 ($1.36).

In addition, Gartner doesn't expect the new iPod nano with a major hardware revision and doubled storage capacities to 8 GB and 16 GB, and the updated iPod touch with 16 GB and 32 GB capacities to have a significant impact on the NAND flash market.

-Gina Roos
EE Times

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