The memory market is looking up after a dismal first half of the year, with market watcher iSuppli predicting that free-falling prices will level out in the coming months.
iSuppli has upgraded its rating for the DRam marketplace from ‘negative’ to ‘neutral’ for the near-term, due to signs of increased market momentum and a slowdown in price erosion.
The negative rating has been in place since January. During that time the DRam marketplace has been sorely hit by over-supply and drastic price cutting, with prices plummeting 70 per cent in the six months to June. However, in July OEM prices rose for the first time.
Nam Hyung Kim, director and principal analyst for memory ICs/storage systems at iSuppli, said: “Although iSuppli has upgraded the market rating, we remain concerned about the inventory situation in the DRam supply channel. DRam suppliers’ inventory has been reduced slightly. However, inventory in the spot market channel is still at relatively high levels.
“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.”
Although there are still inventories that need clearing, there will be less DRam produced in the third quarter than in the first two quarters as manufacturers switched production to higher-margin Nand Flash.
Strong prices are being enjoyed by many players in the Nand market, thanks mainly to reduced supply. Both Samsung and Hynix switched more production from DRam to Nand in May and June, which will lessen the amount of DRam on the market during August and September. This should help boost prices.
Although the situation is looking a little less bleak, DRam memory manufacturers have been suffering this year. Nanya Technology is the latest to report poor financial results. Taiwan’s second largest memory maker reported its first quarterly loss in two years because of falling DRam prices. Nanya reported a second-quarter loss of $86m, compared with a first-quarter profit of $100m and a $113m profit for the same period in 2006.
Despite this, Nanya agreed with the general consensus that things are picking up.
Pai Pei-lin, vice president at Nanya, said: “Our inventory is extremely low, and orders have far exceeded our supply. Our customers have told us that end-demand is picking up. We have also seen back-to-school demand in Europe.”
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