So, the only question is whether PC memory will enjoy the same demand as last year. As we have said, capital expenses are being reduced, companies are re-structuring themselves trying to reduce the costs and we just can’t hope for any big growth of spendings on IT. There is a curious opinion that those who bought computers in the end of 1999 to avoid the Millennium crash are now ready to upgrade their systems. But where are all those upgrades and is the upgrade so necessary? We can definitely say that there have not appeared any tasks (especially in the corporate market) putting much higher demands on the hardware part of an average PC.

By the way, the same is true for the purchases of a PCs today. It’s quite enough to have about 256MB RAM now for ordinary work. If the memory price dropped twice today, would it lead to users buying 512MB for the same price they pay for their today’s 256MB? No, what for? A mass user just doesn’t come across applications that require these 512MB.

So, of course there will be growth, but there won’t be anything exceptional. There are simply no incentives for that.

That’s why we have those 30-40%. It’s interesting that CPU manufacturers are also facing similar problems nowadays. If we use economics vocabulary to characterize the demand in this market sector, will sound as follows: the demand in this segment is inelastic. It means that the 50% price drop doesn’t result in doubling of the demand growth as there is simply no necessity to increase CPU efficiency and memory amount any further. So far, CPU manufacturers as well as DRAM makers couldn’t resolve this situation. Those super-overclocked “PC4000” modules or 2GB DIMMs, which have been available for servers only, are the signs of this dead point. The general tendencies for higher memory speed and volume are carried to an absurdity of a niche product here.

To sum it all up, we will have certain memory sales growth this year, but no big one, just like last year.

About Growing Things: Supply

Let’s now turn to the second component of the end price: the supply. This is quite a different story. To begin with, the anticipated demand growth would push all the manufacturers to load their production facilities to the full. And that could be the only thing to be done this year. And in reality the things are much sadder.

Firstly, even if we disregard for a minute all new technologies and fabs being built now, the production volumes will increase due to the facilities, which haven’t ever been involved yet. Here we are definitely talking about the Chinese contract makers. The best example will be Elpida and Infineon having made friends with Chinese semiconductor giant - SMGC.

Secondly, we should keep in mind all those 300mm wafer fabs coming into service throughout 2003. Their manufacturing potential is immense. Here is an example: a new Micron fab in Virginia has already made the first samples of  0.11micron 300mm wafers, and when it reaches its full productivity, it will be able to produce 45% of the overall memory amount produced by all Micron fabs now! And there will be several fabs like that coming into operation this year.

Yeah, they are very unlikely to reach their peak productivity this year, but the shift towards 300mm wafers and 0.11micron manufacturing technology will be evident. One more example from Micron: 0.11micron chips have about 6% share in company’s total product output, but by the end of this year it will be about 50-60%.