DRAM forecasts reflect conflicting views
By Jack Robertson
Electronic Buyers' News
(01/14/00, 06:38:11 PM EDT)
DRAM prognosticators have compiled a confusing series of forecasts at the outset of 2000, as the sector presents two distinctly different faces to the market.
A report issued this week by Salomon Smith Barney Inc. warned that DRAM demand is expected to slow to its lowest levels since the semiconductor industry's 1993 recession. Jonathan Joseph, an analyst at the financial firm in San Francisco, cited the latest figures from the Semiconductor Industry Association, showing that DRAM bit growth in November slacked off to 42%-half the roughly 80% growth rate to which the industry has grown accustomed.
“If DRAM supply grows by 60% to 70% this year and demand doesn't pick up sharply, then we may continue to see an oversupply in the market,” Joseph cautioned.
By contrast, Dataquest Inc. has predicted that the inventory buildup will evaporate by midyear and signal the start of a two-year shortage. Klaus-Dieter Rinnen, a Dataquest analyst, claimed the lack of new DRAM fab capacity coming on line means supply won't be able to keep up with OEM demand, even as chip vendors work to shrink line widths and die sizes and improve yields.
In a separate report, Merrill Lynch Securities concurred with Dataquest, noting that DRAM bit supply will increase only 50% in the second half of the year, which is not enough to keep pace with demand. “Bit growth that low would result in flat or increased prices in the DRAM market,” the New York-based company stated in its weekly semiconductor report.
In the last few months, the DRAM market has behaved erratically, alternating between periods of shortage and increasing inventories, the latter of which has brought a corresponding fall in pricing. Analysts and DRAM producers alike agree that supplies of most DRAM in the last month have been adequate. In that time, both spot and OEM pricing have eased, with workhorse 8x8 64-Mbit SDRAM reportedly selling for less than $9 in both markets.
Jeff Mailloux, DRAM marketing manager at Micron Technology Inc., Boise, Idaho, said, “It's too early to tell how the DRAM market will react in the first quarter.” He noted that DRAM demand historically has tapered off in the first three months of the year, before rebounding sharply in the second quarter.
Joseph, however, warned that the softening DRAM demand reported by the SIA went beyond any seasonal buying pattern. “These are year-to-year comparisons,” he said. “Any seasonal factors in the market would apply to both years. The slowdown in demand to 42% bit growth last November is significant.”
Joseph attributed some of the ease in demand to the fact that PC memory capacities are increasing at a slower rate. “Even though the number of PCs is growing 15% to 18% a year, the slower increase in memory size means a tapering in DRAM demand,” he said.
Since DRAM prices dropped sharply late in 1995, average system capacity has doubled annually from 8 Mbytes to 64 Mbytes. However, Bob Eminian, vice president of marketing and corporate communications at Samsung Semiconductor Inc., San Jose, estimated that PCs shipping in the first quarter will average 96 to 100 Mbytes of RAM and will end the year at a high of 160 Mbytes, for an approximate annual average of 130 Mbytes.
Eminian said Windows 2000 and new Macintosh operating systems simply don't require consumer PCs to double their main-memory capacities indefinitely, and doesn't anticipate another spike in capacity growth until Internet-based applications like videoconferencing, video streaming, and voice-over-IP come into the mainstream. “The Internet isn't going to be ready for that this year,” he said. “But the application is still going to define the PC and the requirements you need.”
Although DRAM saturation is likely in the PC arena, Eminian said the industry will work off first-quarter inventories and face a parts shortage because most DRAM makers have put capital projects on hold. He estimated that it will be two years before new fab capacity comes on line to take up the slack.
Demand from the PC market tells only part of the story, industry executives claim. Farhad Tabrizi, vice president of strategic memory marketing at Hyundai Electronics America, San Jose, said mushrooming DRAM growth in other sectors, such as servers, telecom equipment, and consumer electronics, will more than offset any drop in bit consumption by PC makers.
“Servers alone are doubling and tripling the average system memory size to 4 or 16 Gbytes,” he said. “We're even talking to some server OEMs about 64-Gbyte memory.”
|
