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DRAM price downturn to arrive in September

DRAM price downturn to arrive in September

Market conditions for DRAM suppliers are set to worsen next month following a brief respite, a market intelligence company said in its latest report.
ISuppli Corp. previously projected that DRAM prices would undergo a downward correction in October, following the current period of relative strength that brought an end to a phase of severe erosion in the second quarter. However, iSuppli said it now believes the DRAM prices will begin to decline one month earlier - in September.
"Near-term market conditions remain in a state of flux with a great deal of uncertainty in the supply chain as suppliers and distributors continue to work off a glut of DRAM inventory. Furthermore, sales momentum is waning in the DRAM spot market, as rising prices and falling supply of LCD panels cut into the available budget for memory in some PCs," said the research house.
"This is bad news for memory suppliers, which had been basking in the present period of relative pricing strength. Weak pricing in September will set the stage for further erosion in the fourth quarter."
The industry tracker said it now expects possible double-digit sequential price declines in the final quarter of the year, erasing any increases that aided suppliers in the third quarter.
"Because of this, DRAM suppliers' profitability will dwindle in the fourth quarter compared to the third," iSuppli predicted.
Amid signs of improvement in pricing, iSuppli in July upgraded its rating of near-term market conditions for DRAM suppliers to "neutral," up from "negative."
OEM DRAM prices rose in the first half of July after the market hit bottom at the end of June. The key reason for the price increases was a reduction in production among DRAM makers, which brought supply and demand back into balance, it noted.
"By reducing their output, DRAM suppliers have helped bring about higher pricing in the third quarter," said Nam Hyung Kim, director and chief analyst for memory ICs/storage systems at iSuppli.
Suppliers' efforts to cut production starting in the third quarter will play an important long-term role in strengthening the DRAM market. Global annual bit growth in 2008 will amount to less than 60 percent, compared to the explosive 97 percent bit growth expected in 2007. This will help rebalance supply and demand in the market.
Because of this, iSuppli said it remains optimistic about DRAM market conditions in 2008. iSuppli said it still anticipates that NAND flash will undergo a downward price correction in September. Despite all this, iSuppli is not reducing its rating of DRAM market conditions to "negative" at this time.
ISuppli said it expects global DRAM revenue to grow 17.5 percent in 2008, following weak growth of less than two percent in 2007.