2007: a less-than-memorable year for DRAM
Edited by Suzanne Deffree -- EDN, January 10, 2008
If there were ever proof that optimism doesn’t necessarily lead to success, the 2007 DRAM market is such proof. Microsoft’s Vista spurred hopes of increased demand for 1-Gbyte DRAM, but those hopes went unfulfilled, even though vendors ramped up capacity in preparation. “A lot of it had to do with how 2006 ended,” says Paul Zecher, commodity manager for memory at independent distributor Converge. “There was so much capacity coming onboard ... that, once we got into the holidays and consumption started to slow down, those guys were up and running. A lot of it had to do with their expectation that Vista would take off going into the first half of ’07, as well. They were banking on that to happen, and it didn’t.”
According to Zecher, 1-Gbyte DRAM is the “module of choice” for Vista PCs, and, as such, vendors heavily ramped up production. Overcapacity led to deteriorating market prices, many of which fell below cash costs in the final quarter of 2007. That oversupply is expected to bleed into 2008’s first—and, possibly, second—quarter. “The DRAM recovery will be driven by the supply side, with inventory dwindling and growth in bit production decreasing,” says Nam Hyung Kim, director and chief analyst for memory ICs and storage systems at iSuppli. “This [decrease] will cause availability to tighten and prices to rise. However, this scenario assumes that suppliers’ behavior will be rational, and they will not engage in any massive production increases that could send DRAM pricing into a new dive.”
Zecher also notes the possibility of corporate upgrades finally adjusting to Vista systems in 2008 but warns that this adjustment depends heavily on global economies (see “Demand-driven downturn possible in 2008”). “If companies are hurting or there are layoffs, more than likely they are not going to start upgrading their systems. And Vista is not as easy as a lot of the other Microsoft upgrades,” he says.
