DRAM Market to Shrink, Shakeout Looms - Gartner
October 18, 2001 4:14 am EST
TOKYO (Reuters) - Market researcher Gartner Dataquest said on Thursday the global market for dynamic random access memory (DRAM) chips was likely to shrink an additional 19 percent in 2002 after a massive 67 percent contraction this year.
It added the industry was set for consolidation as manufacturers of DRAM chips, used primarily for memory in personal computers, face mounting losses and spot prices less than 10 percent what they were little more than a year ago.
"Pricing is already so far below the cost of production all companies are making a loss," Andrew Norwood, senior analyst with Gartner Dataquest's semiconductor group, told a briefing for reporters.
"If it falls further it will go below variable costs and we'll see companies going bankrupt. Some sense of reality has to return to the industry."
Norwood expected that would happen around the first quarter of next year, especially given the financial weakness of South Korea's Hynix Semiconductor Inc (00660.KS), the world's third-largest DRAM producer.
He expected DRAM prices would subsequently bottom out in the second quarter of next year.
With the global PC market set to post its first decline ever this year in unit shipments, reflecting saturation of the key U.S. and European markets and the weakening world economy, Gartner Dataquest expects the global DRAM market will be worth $8.5 billion next year, barely one-fifth its value in 1995.
Norwood added the top two DRAM producers, Samsung Electronics Co Ltd (05930.KS) and Micron Technology Inc (MU.N), seemed to be expanding market share this year while Germany's Infineon Technologies AG (IFXGn.DE), the fourth-largest, was also moving aggressively in the market and was expected to gain share.
Japan's Nihon Keizai Shimbun business daily reported on Thursday that Infineon is in the final stages of talks with Toshiba Corp (6502.T), the world's second-largest chipmaker and number six in DRAMs, on combining their DRAM operations.
Norwood was also upbeat on the outlook for Elpida Memory Inc, a 50-50 venture between Japan's NEC Corp (6701.T), the world's fifth-largest DRAM maker, and Hitachi Ltd (6501.T), number seven.
"Certainly for Elpida, if it can hold its nerve for the next 12 months, it should have ample opportunity to become a major player in DRAM, so Japan would have a world champion," he said.
Limited downside seen in DRAM prices
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