DRam makers face worst year since 1985

Memory sales are collapsing with analysts warning that 2001 will be the worst in 16 years for makers of Dynamic Random Access Memory (DRam) chips.

Global revenues will fall by 55.5 per cent on 2000’s figure of $31.5bn to just $14bn, according to Gartner Dataquest. Andrew Norwood, a senior analyst at the company, said: “The last time we saw a DRam revenue decline of this scale was in 1985 when the market declined 55.1 per cent.

“Both the 2001 and 1985 market crashes were brought about by a sudden decline in demand and increasing levels inventory. In 1985, it was the end of the home computer boom; today, it is the slowing growth in PC shipments and inventory build-up that started in 2000.

“The only thing that can save the DRam industry from its worst year is if major companies like Samsung, Micron Technologies and Infineon Technologies announce production cut backs.”

The news may be lousy for the industry but consumers are set to benefit. DRam pricing has fallen so dramatically – about 80 per cent in the past 12 months – that today an end user adding an extra 128Mb of memory to their PC will have to pay less than $20 for a memory module that cost $120 a year ago.

Gartner explained that most DRam companies are making losses now, and that this will continue into 2002. “In a situation like this, you would expect to see companies exiting the market, but the cost of quitting the DRam industry is high, and what do you do with the spare fabrication capacity?” asked Norwood.

“You can sell your DRam business, as Texas Instruments did in 1999 when Micron Technologies acquired its DRam operation, or companies could follow Motorola’s example. In 1998, the company phased out of the DRam market, but continued to supply DRam to its joint-venture partners for a period,” he added.

Gartner said that 2002 will be a transition year, with low growth returning to the market, but that it should enjoy rapid growth in 2003.