DRAM prices to rise

By Jim Carbone -- Purchasing, 4/30/2008 11:57:00 AM

After falling for months, the average price per megabyte of DRAM will rise by 2% in the second quarter, according to researcher iSuppli.

The price per megabyte for DRAM dropped 17% in the third quarter and 31% in the fourth quarter of 2007. However, DRM inventories in the supply chain have been reduced and memory IC manufacturers have cut back on capital spending which will reduce the rate of supply growth. That mean as unit demand builds for the rest of the year, prices will rise.

“Although the DRAM suppliers themselves are still carrying more inventory than normal, stockpiles in the channel have been reduced significantly,” says Nam Hyung Kim, chief analyst at iSuppli. “Furthermore, OEMs including the PC makers now are at optimal DRAM inventory levels, meaning their orders will increase during the critical third-quarter holiday build season.”

DRAM suppliers early this year said they plan to cut their capital spending on production capacity by about 40% in 2008 compared to 2007. But due to a lack of profitability and diminishing cash reserves over the past several months, many suppliers won’t be able to afford spending even at such a reduced level, and may slash their capital outlays by an even greater margin this year. This should cause capital spending for the industry as a whole to decline by more than 50% in 2008 compared to 2007, according to iSuppli.

“With these capital spending cuts, DRAM megabyte shipment growth for the industry as a whole is expected to slow in 2008,” says Kim. Megabyte shipments were expected to rise by 61% in 2008, compared to an 89% rise in 2007. However, reduced capital expenditures will lower iSuppli’s previously estimated 61% increase to the mid-50% level this year. 

Also see:
Semiconductor capital equipment spending to drop 20%