Articles: Memory

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Graver than the December results is Samsung’s prediction that the growth of the DRAM supply will exceed the growth of the demand by 1 percent in this year (45 against 44 percent growth). And this comes from Samsung who have exhibited just a childish optimism – take its forecast about a severe DRAM deficit in the fourth quarter of 2004. If Samsung doesn’t expect a deficit of memory this year, the real situation is much more serious. iSupply, for example, promises 49 and 44 percent growth of supply and demand this year, and this looks more like truth.

iSupply thinks the volume of the DRAM market in money terms will be about $27 million, i.e. only 2.6 percent above the year 2004 (compare this to the 51-percent difference between 2004 and 2003!). The agency draws a grim picture with the average price per megabyte going down by 31 percent and the manufacturers’ profits to $4 billion against $4.7 billion in 2004. They suppose there’ll be jugglery going on with the facilities between DRAM and flash which can lead to the manufacturers’ making wrong estimates of the demand on the particular product and, as a consequence, to local shortages that can push the prices up for a short while.

As for the prices, the spot market has become a poor indicator of the general trends as the major chip and module makers pay less attention to it, preferring to focus on contract shipments where the major OEMs guarantee a relatively stable demand in a world where there’s a not very favorable forecast for the entire year. Samsung, the biggest player in the market, came to the fore, saying it would change the ratio of its spot/contract market shipments from the last-year 35/65 to 20/80. Major Taiwanese companies like ProMOS and Nanya followed the leader expressing the same desire.

On the other hand, the spot prices still remain an indicator of the market’s general disposition, although January is of little interest in this respect: it started with the New Year holidays in Europe, then the disaster in south-east Asia happened, and the preparation to the Asian New Year were underway at the end of the month. So, there were few workdays in January, with all the consequences. The customers were not active, trying to find their bearings in the situation.

So when it became clear that there wouldn’t be any big laying-in of supplies before the Christmas holidays, the manufacturers and distributors began to throw away their stock, trying to reach their sales goals for January. This of course resulted in reduced prices at the end of January: from $4.02 for a 512Mb DDR400 chip at the very beginning of the year to $3.8. DDR2 has been falling down throughout the entire month (well, it has much room to fall down to), to $4.75 and $5.27 for 400MHz and 533MHz 256Mb chips, respectively. Thus, the price difference between DDR and DDR2 was 25 and 39 percent, for these two respective speeds, by the results of the month. That said, it’s obvious that DDR2-400 can’t be taken seriously, while DDR2-533 which aspires to become the mainstream still needs improving upon.

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