SB and all: FYI
....DRAM price wave has yet to crest
September 22, 1999
ELECTRONIC BUYERS NEWS via NewsEdge Corporation : Something is going on in the DRAM industry that we have not seen in more than a decade of watching this important and highly volatile market.
Spot-market DRAM prices for bellwether 64-Mbit parts in the past two months have nearly quadrupled from approximately $4 to more than $15. And contract prices have begun to fill the gap, moving up more than 50% from $5 to nearly $7.50. Should spot-market prices remain at the current level, it seems likely contract prices will move to $10 or better in the next couple of months. What's going on?
On the one hand, demand for DRAM has picked up more rapidly than most sellers and buyers anticipated. Most DRAM vendors expected some seasonal firming in demand as the back-to-school and Christmas PC markets picked up. Since June, we have seen an increase in PC unit shipments, which we predicted would grow 15% this year, and now believe will expand 23%.
On the supply side, manufacturers have become complacent in recent quarters, expecting that accelerated shrinks would increase unit output sufficiently to meet demand. In fact, most of the Japanese, Korean, and Taiwanese companies have had a much tougher time shifting to 0.22-micron processes than did Micron and Samsung.
And the 0.18-micron shrink looks like it will get even tougher. In addition, the fragmentation of the market into Rambus DRAM, DDR, PC133, 128-Mbyte, and 256- Mbyte has all eaten up more silicon.
Finally, most companies, particularly those in Asia, are still cash-strapped and are spending on new technology for shrinks, but not for new greenfield capacity. And they are reluctant to spend more than a billion dollars on a new 8-in.-wafer fab, which could be obsolete in only two years when 12-in.-wafer fabs come in. Nobody wants to be the last DRAM maker to have bet on a new 8-in. fab.
In this accelerated PC market, only new fabs and more wafers will ease the current DRAM shortage. Given most companies current reluctance to take that risk, the apex of the current DRAM price upturn may be some time in coming.
Copyright c 1999 CMP Media Inc.
By Jonathan Joseph; Salomon Smith Barney Inc. |
