DRAM Market Has Hope For Bright Future

The DRAM market has a glimmer of hope after a dreadful 2007. Analysts expect a rebound in 2008 as DRAM supply begins to normalize. Global third-party DRAM module suppliers are expected to see a rise in shipment this year to a total of $8.9 billion, a 9 percent gain from $8.1 billion last year. In 2007 DRAM manufactures ramped up production and invested heavily in new fabs, as they essentially bet their business on the success of Microsoft Windows Vista to drive demand. Unfortunately, Vista had a lukewarm introduction.

“Last year was disastrous for the DRAM chip industry, due to an acute oversupply and the resulting price plunge," explained John Lei, analyst, memory/storage IC systems for iSuppli. “This caused global DRAM chip revenue to decline by 7.3 percent. The poor conditions in DRAM chips led to even worse conditions in the DRAM module business. The third-party DRAM module makers bore the brunt of the downturn, because they lost market share to their chip suppliers.”

With the market oversaturated with supply and no killer application looming in the future, third-party suppliers suffered large revenue declines in 2007. “Looking at the Top-10 third-party DRAM module maker rankings for 2007, there were two groups of companies: those that were able to keep their heads above water, and those that were swamped by the market-downturn deluge,” Lei said.

Kingston, known as the world’s largest third-party memory supplier, fought hard to increase revenue 1.1 percent in 2007. Ranked number 2, Smart Modular Technology saw revenue drop of 3.5 percent. However, the biggest success story went to number 6 ranked Apacer Technology. Apacer reaped the benefits from parent company Acer’s acquisition of Gateway as it expanded its business by 24.4 percent.

While most of the leading third-party suppliers fought to keep their heads above water, many of the second-tier suppliers are being forced or considering to leave the DRAM market. “Although market conditions are set to improve soon due to the inevitable price rebound, it’s uncertain how long these companies can stay in the business given the top-tier suppliers’ aggressive moves to expand their market share,” said Lei.