Samsung suffers from DRAM squeeze

iSuppli says even market leader Samsung is no longer immune to market slowdown

Overindulgence in the DRAM market could prove fatal, market analyst iSuppli has warned, with even Samsung needing some rehabilitation.

Dominant market leader Samsung was thought immune to the sort of hangover it is now experiencing, according to a new report from iSuppli.

But the company’s fourth quarter of 2008 completely missed its shipment growth guidance. Samsung suffered a massive headache, with a decline in market share and lost money for the first time in a year.

According to iSuppli, global DRAM unit shipments achieved nearly zero growth in the fourth quarter compared to the third. Average selling prices (ASPs) declined by 38 per cent, significantly above the historical annual average of 30 per cent. With shipments flat, and prices falling, global market revenue amounted to $4.2bn (£2.9bn) in the fourth quarter – well short of iSuppli’s forecast of $5.8bn.

The yearly revenue fell short of iSuppli’s forecast, with $23.6bn collected in 2008, whereas the analyst predicted $25bn.

After a short second-quarter recovery, the DRAM market has been mired in a downturn for nearly six months. In September 2008 iSuppli downgraded its estimate of short-term conditions for suppliers to Negative from Neutral. And that was before over supply, weak demand and sharp price declines showed on the performance charts.

The downturn is hitting across the board. Five of the top 10 suppliers suffered sequential declines in DRAM revenue in the third quarter, including Samsung. In the fourth quarter, all the top 10 saw their revenue decline.