Amid signs of increasing market momentum and an end to the severe price erosion seen throughout 2007, iSuppli Corp. has upgraded its rating of near-term market conditions for DRAM suppliers to "neutral," up from "negative."
iSuppli downgraded its near-term rating of DRAM market conditions to negative during the week of Jan. 24, 2007. The DRAM market then experienced a severe downturn, with more than a 70 percent price decline by the end of June.
However, market momentum changed in July, as iSuppli expected. OEM prices increased in the first half of July after the market hit the bottom at the end of June.
"Although iSuppli has upgraded the market rating, we remain concerned about the inventory situation in the DRAM supply channel," said Nam Hyung Kim, director and principal analyst for memory ICs/storage systems at iSuppli.
"DRAM suppliers' inventory has been reduced slightly. However, inventory in the spot market channel is still at high levels," Kim said. "OEMs also are believed to be carrying three to four weeks of inventory. However, the consensus about the bottom of the market and suppliers' strong resistance to further price declines resulted in price increases for the first half of July."
Kim said he expects that the momentum will slow once distributors and other channel players begin to sell off their inventories in search of profits. Most distributors and other channel players purchased DRAM a few months ago at higher prices than current levels.
Because of this, Kim said he isn't ready to declare a recovery in the DRAM market at this time.
However, DRAM supply bit growth in the third quarter will be lower than in the first and second quarters as suppliers eased their production growth by converting manufacturing to higher-profit NAND flash. These very strong NAND prices are a positive factor for the DRAM market. Taiwanese suppliers also are undergoing a process migration to smaller than 80 nanometers, resulting in lower bit growth in the third quarter.
In the NAND flash market, suppliers are enjoying the current strong prices. However, prices rose in the second quarter mainly due to reduced supply growth-not because of increased demand. The current rally will be short lived and prices will decline again in August when DRAM suppliers' NAND output increases dramatically. South Korean DRAM suppliers Samsung Electronics Co. Ltd. and Hynix Semiconductor Inc. started shifting their capacity from DRAM to NAND at the end of May and early July, which will impact the market starting in August.
iSuppli believes that the NAND flash memory market still needs additional demand drivers beyond the iPhone to achieve a recovery in the second half of the year. Until more evidence is available, iSuppli will keep its current neutral rating for NAND suppliers. iSuppli upgraded near-term NAND market condition to neutral in the week of March 26, up from negative.
For more on the DRAM and NAND market, see Kim's latest report entitled: DRAM OEM Prices Up, Finally. For more information on this report, please visit: http://www.isuppli.com/catalog/detail.asp?id=8582
Isuppli
