SAN FRANCISCO—While overall memory chip prices are expected to stabilize during the remaining quarters of 2009, a true recovery in demand and profitability is not imminent, according to market research firm iSuppli Corp.
After a 14.3 percent sequential decline in global revenue in the first quarter, the market for DRAM and NAND flash chips will grow throughout the rest of the year, iSuppli (El Segundo, Calif.) predicted. Combined DRAM and NAND revenue will rise by 3.6 percent in the second quarter, and surge by 21.9 percent and 17.5 percent in the third and fourth quarters, respectively, according to the firm.
"While this growth may spur some optimism among memory suppliers, the oversupply situation will continue to be acute," said Nam Hyung Kim, director and chief analyst for memory ICs and storage at iSuppli, in a statement.
Many memory chip suppliers are attempting to paint a more optimistic picture of the memory business by prematurely talking up a potential market recovery, iSuppli said.
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In DRAM, the imbalance between supply and demand is far too great for the market to recover profitability in short order, Kim said. He added that shipments of equivalent 1-Gbit density DRAM will exceed demand by an average of 14 percent in the first three quarters of 2009, preventing the strong price recovery required to enable most memory suppliers to achieve profitability.
"Even if all of the Taiwanese DRAM suppliers idled all their fabs, which equates to 25 percent of global DRAM megabit production, the market would remain in a state of oversupply," Kim said.
DRAM suppliers have been cutting capacity, but must still wait for fundamental demand recovery, according to iSuppli. The firm believes that another round of production cuts will take place in the second quarter, which will positively impact suppliers' balance sheets late this year or early in 2010 at the earliest.
DRAM prices now amount to only one-third-level of Taiwanese suppliers' cash costs, iSuppli said. Unless prices increase by more than 200 percent, cash losses will persist for these Taiwanese suppliers, the firm said. The average megabit pricing for DRAM is projected to rise in every quarter of 2009, but not remotely enough to allow suppliers to generate profits, iSuppli said.
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