DRAM sales to fall 55.5%, making 2001 the worst year ever for suppliers, says Dataquest
Only cutbacks by major producers will stop the bloodbath in memory segment, warns analyst
Semiconductor Business News
(06/21/01 08:19 a.m. EST)
EGHAM, England --The incredible shrinking DRAM business is collapsing at an unprecedented rate and will suffer its worst year ever in 2001 with a 55.5% decline in revenues compared to 2000, according to a new forecast released by Dataquest Inc. today.
Dataquest now predicts that worldwide DRAM revenues will fall from $31.5 billion in 2000 to $14 billion in 2001. In 1995, DRAM sales hit their highpoint at just over $40 billion before plunging in the last semiconductor recession.
"The last time we saw a DRAM revenue decline of this scale was in 1985 when the market declined 55.1%," said Andrew Norwood, senior analyst with Gartner Dataquest's worldwide semiconductors group based in Egham. "Both 2001 and 1985 market crashes were brought about by a sudden decline in demand and increasing inventories," he said, comparing what many analysts believe are now the two worst years ever for the entire chip industry.
"In 1985, it was the end of the home computer boom; today, it is the slowing growth in personal computer shipments and inventory build-up that started in 2000," Norwood observed.
"The only thing that can save the DRAM industry from its worst year is if major companies like Samsung, Micron Technologies and Infineon Technologies announce production cut backs," said the Dataquest analyst.
Right now, it appears that 2002 will be a "transition year," according to Dataquest, which expects to see low growth returning to the market. The market research firm said 2003 should be the strongest DRAM growth year since the early 1990s.
DRAM merchants are certainly taking the 2001 downturn on the chin. On Wednesday, Infineon Technologies AG in Munich cut its revenue estimates for the current fiscal quarter to show a 30% sequential decline from the prior quarter, and it credited much of the blame on plunging DRAM prices. Infineon said average spot market prices for 256-megabit DRAMs have dropped 30% from the end of March (see June 20 story).
Dataquest said DRAM pricing has declined by about 80% in the past 12 months. Analysts at the San Jose-based research firm said that this week, spot market pricing for a mainstream 128-Mbit memories device fell to less than $2 and even contract pricing has fallen below $3. At less than $3 each, the price of a DRAM is under the cost-of-production for most manufacturers, said Dataquest, which added that most DRAM companies are making losses now, and this will continue into 2002.
"In a situation like this, you would expect to see companies exiting the market, but the cost of quitting the DRAM industry is high, and what do you do with the spare fab capacity," Norwood said. "You can sell your DRAM business, as Texas Instruments did in 1999 when Micron Technologies acquired its DRAM operation. Or companies could follow Motorola's example," he added. "In 1998, the company phased out of the DRAM market, but it continued to supply DRAM to its joint-venture partners for a period."
While the low DRAM prices are bad news for troubled memory suppliers, the situation is great news for computer users. Dataquest estimates that computer users can now add an extra 128 megabytes of memory to their PCs for less than $20 for a memory module. That same memory module last year would have cost as much as $120, according to Dataquest. |
