DRAM revenue growth to slow in 2007

Despite steady sales volume, DRAM (dynamic RAM) memory chip vendors will see their revenue growth slow dramatically in 2007 thanks to a slump in prices, according to a report released Thursday.

The price of DRAM chips, which are used to store data in PCs and other electronic devices, has typically dropped by 30 percent each year. But in 2006, revenues swelled as prices dropped only 13 percent, according to the report from iSuppli Corp.

The market will return to its usual behavior in 2007, with prices forecast to drop 31 percent. That will lead to a predicted revenue increase of 11.3 percent in 2007, far short of the 33.6 percent increase in 2006, said iSuppli analyst Nam Hyung Kim.

Prices were propped up last year because memory chip manufacturers started producing more NAND flash chips instead of DRAM. That shortage will disappear in 2007, as iSuppli predicts that seven 300-mm wafer fabrication plants will reach full DRAM production levels. Also, the NAND market will probably slump, unless demand is sparked by a hot new product like Apple Computer Inc.'s anticipated iPhone.

Still, DRAM sales are increasing so fast that the market will generate total sales of US$36.95 billion, the highest level since 1995. Unit shipments of DRAM, measured in millions of 256M byte-equivalent chips, will grow from 11,396 in 2006 to 18,469 in 2007 and 62,618 in 2010, iSuppli said.

That comes as welcome news for an industry struggling to recover from a series of indictments for price fixing.

In December, prosecutors at the U.S. Department of Justice (DOJ) announced that an executive at Samsung Electronics Co. Ltd. would serve 10 months in prison and pay a $250,000 fine for conspiring with other companies to fix prices. Since 2003, the DOJ has charged four DRAM vendors and 18 people in the global price-fixing investigation.

According to the DOJ charges, Samsung agreed with other manufacturers to artificially inflate their prices, thus forcing PC vendors such as Dell Inc., Hewlett-Packard Co., Apple Computer Inc. and Gateway Inc. to charge higher prices to consumers.

In addition to Samsung -- the world's largest manufacturer of DRAM -- other companies that have pleaded guilty to DOJ charges include number-two vendor Hynix Semiconductor Inc., Elpida Memory Inc. and Infineon Technologies AG.

The IDG News Service is a Network World affiliate.