DRAM To See Dramatic Growth: Report

Research consultancy Gartner gave some good news to makers of dynamic random-access memory (DRAM) chips, forecasting market growth that could be the beginning of an economic recovery for the sector.

According to Gartner, worldwide DRAM revenue is forecast to reach $5.1 billion in the third quarter of 2003, a 37.8 percent increase over the third quarter of 2002.

Gartner analysts project DRAM revenue to reach $18.9 billion in 2003, a 21.8 percent increase from 2002.

Prices in the spot and contract markets began to stabilize in the second quarter of 2003, and have continued to improve, primarily in response to reduced production. Some major vendors are also reducing anticipated DRAM production in favor of other devices such as NAND flash. Average selling prices are forecast to increase 20.5 percent in the third quarter of 2003, reaching $5.55, on a 256Mb equivalent basis.

Gartner’s sweet news came with a spoonful of medicine: DRAM will remain the most volatile area of the semiconductor industry.

“The expected balance between supply and demand could easily swing into oversupply if PC demand is not as strong as expected,” Andrew Norwood, principal analyst for Gartner’s semiconductor research group, said in a statement.

However, the analysts warn if DRAM manufacturers over-produce in an attempt to grab share while the grabbing is good, their revenue and profits could sour faster than a sippy cup of milk in a hot car.

The report echoes the promise of better days for the overall chip industry. In July, Gartner said that worldwide semiconductor capital equipment spending was poised to return to positive growth in 2003. Gartner is forecasting spending in the sector to total $29.9 billion in 2003, a 7.9 percent increase from 2002, compared with 2002’s 37.9 percent decline.

In June, the World Semiconductor Trade Statistics organization and Semiconductor Industry Association (SIA) released its midyear 2003-2006 forecast, projecting a compound annual growth rate of 9.8 percent over the forecast period. Beyond 2003, the trade group expects worldwide sales of semiconductors to hit 16.8 in 2004, 5.8 percent in 2005, and 7.0 percent in 2006. The SIA expects industry sales to grow from $141 billion in 2002 to $205 billion in 2006. The majority of that growth, according to the SIA, will be fueled by chip sales.

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