Electronics Production |
Price plunge to slow DRAM revenue growth
According to an iSuppli Report, the DRAM market will reach a milestone in 2007 as it achieves the second-highest annual revenue level in its history, at $36.95 billion. However, growth will decelerate significantly compared to 2006, due to price erosion rearing its ugly head.
“DRAM revenue in 2007 will be exceeded only by the year 1995, when it reached a record $40.8 billion," said Nam Hyung Kim, principal analyst with iSuppli Corp. “On the other hand, revenue will rise by only 11.3 percent for the year, far off the pace from the whopping 33.6 percent expansion in 2006."
The figure below presents iSuppli's global DRAM market forecast.
Source: iSuppli Corp. January 2007
The main culprit for the revenue growth slowdown will be the return of normal price erosion. This year has seen abnormal conditions for DRAM pricing, with the global Average Selling Price (ASP) declining by only 13 percent, far below the historical rate of a 30 percent annual decline. Pricing conditions will follow normal patterns in 2007, with the DRAM ASP expected to decline by 31 percent during the year.
ASPs in 2006 were propped up by memory makers' efforts to diversify their product lines into specialty DRAMs designed for non-PC applications. So although DRAM bit production growth was at an ample 52 percent in 2006, non- PC DRAM supply growth was much higher than PC DRAM supply growth, resulting in greater price stability in the largest application for the memory.
Furthermore, memory makers shifted production away from DRAMs and toward NAND-type flash.
Conditions will be markedly different in 2007, with bit production growth expected to amount to 65 percent. Next year will see seven new 300mm DRAM wafer fabs ramping up production, Meanwhile, NAND market growth will decelerate in 2007, slowing DRAM makers' moves to shift further capacity.
All this will boost DRAM availability and push down pricing.
Does this mean that 2007 will bring unfavorable conditions for DRAM suppliers? Certainly not, iSuppli believes.
Any year when market revenue exceeds $30 billion should be greatly appreciated by DRAM suppliers. With their margins having risen to healthier levels this year and expected to remain strong in 2007, DRAM suppliers should not be badly hurt by the 31 percent price decline next year.
While iSuppli foresees less shifting of production from DRAM to NAND in 2007, allocation of manufacturing between the two memory types will be the major swing factor determining the health of the memory market in 2007.
iSuppli doesn't expect any big momentum changes in the NAND market in 2007. However, upside NAND demand potentially could be a wild-card factor, such as new sales resulting from Apple Computer Inc.'s upcoming flash-based Personal Media Players (PMPs) and its long-awaited iPhone. However, iSuppli doesn't believe these factors will alter NAND market momentum in 2007.
With revenue growth slowing in 2007, conditions are shifting in favor of DRAM buyers, giving them more leverage in price negotiations compared to 2006.
Source: iSuppli Corp. January 2007
The main culprit for the revenue growth slowdown will be the return of normal price erosion. This year has seen abnormal conditions for DRAM pricing, with the global Average Selling Price (ASP) declining by only 13 percent, far below the historical rate of a 30 percent annual decline. Pricing conditions will follow normal patterns in 2007, with the DRAM ASP expected to decline by 31 percent during the year.
ASPs in 2006 were propped up by memory makers' efforts to diversify their product lines into specialty DRAMs designed for non-PC applications. So although DRAM bit production growth was at an ample 52 percent in 2006, non- PC DRAM supply growth was much higher than PC DRAM supply growth, resulting in greater price stability in the largest application for the memory.
Furthermore, memory makers shifted production away from DRAMs and toward NAND-type flash.
Conditions will be markedly different in 2007, with bit production growth expected to amount to 65 percent. Next year will see seven new 300mm DRAM wafer fabs ramping up production, Meanwhile, NAND market growth will decelerate in 2007, slowing DRAM makers' moves to shift further capacity.
All this will boost DRAM availability and push down pricing.
Does this mean that 2007 will bring unfavorable conditions for DRAM suppliers? Certainly not, iSuppli believes.
Any year when market revenue exceeds $30 billion should be greatly appreciated by DRAM suppliers. With their margins having risen to healthier levels this year and expected to remain strong in 2007, DRAM suppliers should not be badly hurt by the 31 percent price decline next year.
While iSuppli foresees less shifting of production from DRAM to NAND in 2007, allocation of manufacturing between the two memory types will be the major swing factor determining the health of the memory market in 2007.
iSuppli doesn't expect any big momentum changes in the NAND market in 2007. However, upside NAND demand potentially could be a wild-card factor, such as new sales resulting from Apple Computer Inc.'s upcoming flash-based Personal Media Players (PMPs) and its long-awaited iPhone. However, iSuppli doesn't believe these factors will alter NAND market momentum in 2007.
With revenue growth slowing in 2007, conditions are shifting in favor of DRAM buyers, giving them more leverage in price negotiations compared to 2006.
