Electronics Production | August 15, 2007

DRAM unit shipments expected<br>to jump nearly 50% in 2007

Following the most painful half-year of DRAM market deterioration since the great collapse of 2001, a feeling of dread has given way to cautious optimism that the 2H07 DRAM market will bring better results.
DRAMs were essentially selling at “give-away" prices in May and June, but evidence suggests that the market, and free-falling ASPs, turned the corner in July and will begin an upward climb resulting in increases in quarterly growth through the balance of 2007.

Second-half optimism can be linked to the typical back-to-school and seasonal holiday demand, but other specific reasons include:

• PC shipments are forecast to increase 12% in 2007, with the average PC forecast to contain 1.4GB of DRAM, an increase of 75% over 2006, when memory per PC averaged 800MB. The average system memory per PC is expected to grow from 1.3GB in 2Q07, to 1.4GB in 3Q07 and 1.6GB in 4Q07. Some DRAM vendors believe as many as 45% of PCs shipped in 4Q07 will contain 2GB of DRAM, the amount required for optimal performance using the Vista operating system.

• Strong specialty DRAM demand driven by handsets and game consoles will also help boost DRAM demand in 2H07. The Xbox 360 (512MB GDDR3 DRAM), PlayStation 3 (256MB XDR DRAM), and the Nintendo Wii (64MB GDDR3 DRAM) all require a significant amount of memory. Meanwhile, increased DRAM content in new-generation handsets and other personal mobile products will generate more growth opportunities for DRAM suppliers. IC Insights forecasts an average 28MB of DRAM per cellular phone handset in 2007.

• Supply growth could slow in 2H07 as some DRAM suppliers shift capacity to NAND flash, and as yield issues arise with the DRAM industry's full-out migration to the 70nm process geometry.

As much as the DRAM price erosion hurt suppliers, end-users took advantage of the low prices for high-density parts and stocked up in 1H07. This trend will continue into the second half of the year. DRAM shipments are forecast to reach 3.0 billion units in 3Q07 and 3.3 billion in 4Q07. For the year, DRAM units are forecast to increase 49%. Shipments of 512Mb devices in 2007 are forecast to surpass total DRAM unit shipments for all of 2006. DRAM bit volume is forecast to surge 81% in 2007, the highest percentage increase since the 88% increase recorded in 1998.

Though it was a very difficult six months for DRAM suppliers in the first half of 2007, supply-demand balance appears to be returning to the DRAM market in the second half of the year.


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