Databeans has cut its forecast for the 2011 DRAM market to US$31.5 billion, as weakness in the consumption of consumer and computing devices across all regions left suppliers with considerable inventory overstock. This has pulled down the overall semiconductor industry projection which is now US$303.5 billion, a 2% increase from 2010, the firm said.
Another issue is that DRAM seems to have reached its limits in the PC space, Databeans indicated. Simply stated, further price reductions do not benefit OEMs as the average PC already includes more DRAM than consumers demand. This freeze in consumption means that current stock is not moving and prices of DRAM, especially the industry bellwether DDR3 2GB, have tumbled in recent months, Databeans said.
Overall DRAM ASPs have dropped 17% from May to August, and are now hovering around US$1.73, according to Database. At this cost, many suppliers are selling the chips at a loss just to move product off their shelves.
As a result, many DRAM suppliers' revenues have been hurt by the lower gross margins which came from DRAM price drops, Databeans said. For example, Micron Technology has posted a surprise quarterly loss. The firm has struggled with the declining demand for PC memory chips. Fellow companies including Samsung Electronics, Elpida Memory and Hynix Semiconductor have also been stung by the DRAM slump, but most of these players have started shifting more of their production over to NAND flash memory in order to offset the losses experienced in their DRAM units, Databeans indicated.
The situation has become grim enough that some experts believe that if smaller DRAM makers are to survive this current situation they should either diversify into new products or seek mergers with larger, more established players. This is particularly true for Taiwan-based manufactures, such as ProMOS Technologies, Powerchip Technology and Nanya Technology, which have reported losses over the past few months, Databeans pointed out. ProMOS, in particular, has lost revenues for 16 straight quarters. This is because it typically faces far greater price strains than other suppliers, which is the result of higher manufacturing costs and more difficult market dynamics. What's more, leaders like Samsung and Hynix, can take advantage of their leading-edge process technologies and manufacturing facilities.
Despite all of this, the future is not completely dark for DRAM. Because DRAM is so closely tied with consumer confidence, a rebound in consumer driven demand will provide DRAM with a boost as well, Databeans said. As such, Databeans projects a slight decline in global DRAM revenues from 2011 to 2013. However, the market should see a rebound in 2014, which should continue into the following couple years until the end of the forecast period. As a whole, Databeans expects a CAGR of roughly 5% over the five-year period spanning from 2011 to 2016.