November 20, 2007

Memory Update: A disappointing year for the memory market

As we approach the end of 2007, we reflect back upon a disappointing year for memory and a holiday build season when the market never gained any strength or momentum regardless of the numerous predictions about a possible turnaround.

Looking back, there were high expectations coming into the year, especially after 2006 finished with record highs for memory prices in the contract and spot markets. Once the 2006 holiday season passed, the market went into a pricing free fall. Aside from a brief uptick occurring in the middle of the summer of 2007, which we feel was based more on pure optimism than on true demand, the market has become one of the worst since the early days of fast page mode technology back in the mid 1990s.

Overcapacity by DRAM manufacturers is one major reason for the current state of the market. Many manufacturers were forecasting a big year in 2007 due to the release of Microsoft® Windows Vista® operating system. Various articles published in numerous publications late last year quoted many high-ranking representatives from Samsung, Hynix and other DRAM manufacturers alluding to Vista being a make-or-break platform for DRAM throughout 2007. Fast forward to November and the only mention of Vista is, “There’s always 2008.”

Without support from the corporate sector spending on new systems, the market has remained in a severe oversupply situation throughout the year. We are once again in a situation where pricing is no longer an issue. Pricing has been stable for a few weeks now with 1GIG DDR2 around $20 and 512M DDR2 at $11. Both are at a level that DRAM experts would never have anticipated, not now or at any point during the last 11 months.

As we wrap up the final months of the year, we look to the future and say, “There’s always 2008.”

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