Two-year shortage of DRAMs looms after Q2, says Dataquest
By J. Robert Lineback
Semiconductor Business News
(01/12/00, 11:07:27 AM EDT)
PEBBLE BEACH, Calif. -- After a brief return to excess capacity in DRAMs at the start of 2000, demand for memory will surpass the world's supply in the second quarter and a shortage will exist for the next two years, predicted Dataquest during a forecasting session here.
The shortage will trigger a new round of capital investments by DRAM manufacturers, which are expected to increase spending on memory plants to $16.4 billion in 2002 compared to about $8 billion in 2000, said analyst Klaus-Dieter Rinnen, associate director of semiconductor manufacturing analysis at Dataquest. At the low point in the last chip recession, DRAM companies only invested $4.1 billion in 1998--meaning that by 2002 manufacturers are expected to increase capital spending 300%, said Rinnen at the annual Industry Strategy Symposium.
The industry's battered DRAM segment took the 1996-98 downturn hard on the chin, with worldwide revenues for dynamic memory chips falling from $42 billion in 1995 to about $15 billion in 1998, according to Dataquest. But average selling prices firmed up in 1999 and unit volumes continued to grow, leading to a 40% growth in DRAM sales to $21 billion last year. Dataquest's new industry forecast now calls for a 43% increase in DRAM revenues to $30 billion in 2000. By 2003, DRAM sales are expected to reach $63 billion, said the San Jose research firm.
The recovery in DRAMs has been so strong that Dataquest last week upped its forecast for total semiconductor sales to a range of $195 billion to $200 billion in 2000 from its previous projection of $182 billion. Total revenues are now expected to grow 22-25% over $160 billion in 1999.
But when DRAMs are taken out of Dataquest's forecast, revenues for the rest of the chip industry are expected to grow by only 13% in 2000. Rinnen told executives at conference that non-DRAM growth would lag the historical industry average during the next four years because of the market's shift from business-related computer products to consumer systems and the growth in higher levels of logic integration on system-level ICs. Pricing competition will also play a factor, he added.
Meanwhile, DRAM sales are playing catch-up after falling sharply in 1996-1998. From the trough in 1998, DRAM revenues are expected to grow 310% by 2002 to $63 billion before hitting the next downturn in 2003. Dataquest predicts that memory sales will dive below $50 billion during the 2003 slump.
During the fourth quarter of 1999, DRAM supplies fell short of demand partly because of inventory buildups and increased shipments of PCs prior to the Christmas shopping season. Excess capacity in DRAMs is expected to exist until the spring when memory buyers return to the marketplace, causing a two-year shortage that will end between the second and third quarter of 2002, according to analyst Rinnen.
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