Memory Production to be Cut (Finally)

Basic economics tells you that when there is an oversupply
of something, you cut back on production.

It took memory manufacturers a little while to figure that
out, but at least they did figure it out.

Gartner estimates that worldwide capital spending on
semiconductor equipment in 2008 will be $47.5 billion, a 19.8 percent decline
from 2007. Memory-related capital equipment would see a 29 percent reduction
and DRAM in particular would drop by 47 percent.

Gartner cited a weakening in the U.S. economy and oversupply
as the reasons for the cut in spending. “The expected bursting of the DRAM
capital spending bubble has finally happened, as rampant overcapacity in that
sector drove unit prices well below cash costs for most manufacturers,”
said Klaus Rinnen, managing vice president for Gartner’s semiconductor
manufacturing group.

Rinnen noted that the memory market spent more than 57
percent of total revenue on capital expansion, “a level which cannot be
supported by the anticipated lackluster revenue growth.”

Much as I love seeing 2GB of memory at Fry’s for $50,
they really needed to smarten up on pricing.

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