DRAM prices set to rebound with cloudy market outlook
Following plunging prices and mounting losses among suppliers in the fourth quarter of 2005, conditions in the DRAM market are likely to take a slight turn for the better in the first quarter of 2006, iSuppli Corp. predicts.
During the fourth quarter, prices for 256Mbit and 512Mbit Double Data Rate (DDR) SDRAM decreased by about 20%. iSuppli is cautiously predicting that prices will have remained on the decline through the end of 2005, before a slight rebound occurs in the first quarter of 2006.
Prices will strengthen due to slowing bit production growth among DRAM suppliers. DRAM bit production is expected to have grown by only about 10% in 2005, compared to 62% in 2004, iSuppli also predicts.
Many DRAM suppliers are already selling parts at prices below manufacturing costs, and thus are holding the line on further production hikes and price cuts. Furthermore, the leading DRAM suppliers, Samsung Electronics Co. Ltd. and Hynix Semiconductor Inc., have become more aggressive in their efforts to convert their fabs from making DRAM to producing a more lucrative product: NAND-type flash memory.
While prices are expected to strengthen in the first quarter, the overall outlook for 2006 appears less positive.
iSuppli now predicts the DRAM market will suffer a slight downturn compared to 2005. Global DRAM sales are expected to decline to $23.97 billion in 2006, down 5.1% from $25.25 billion in 2005. However, DRAM market revenue is expected to rebound in 2007, rising 12% to reach $26.8 billion.
However, the decline in bit production growth potentially could push the DRAM market into positive territory for the year. This could drive DRAM revenue to achieve growth of as much as 10% in 2006, according to iSuppli’s high-side forecast for the year.
Despite this, iSuppli is remaining cautious regarding its outlook for 2006 until signs emerge of positive sales momentum.
