Slowing Economy May Impact Memory Prices

It's difficult to place a positive spin on an economic downturn, but hardware analysis firm iSuppli has given it a good shot this week. There's enough positive momentum in semiconductor sales, the firm now says, for it to escape the hiccups that are in front of it. But yesterday, it adjusted the size of that "hiccup" a little higher; and on Monday, it downgraded its near-term market rating for both DRAM and NAND flash memory segments.

The annual rate of growth in semiconductor sales, iSuppli now says, has been adjusted down a tick to 7.8% from 7.9%, to $255.7 billion for 2006. That momentum will drive the market to higher growth over 2007, by a 10% annual rate, but that growth will slow to 2.6% by 2009.

The reason, iSuppli believes, is not the PC market, whose growth has settled somewhat. Instead, it cites a softening of the consumer electronics market in general, precipitated by rising energy prices, but compounded by rapidly declining average selling prices (ASPs) for even the most popular items.

ASPs for flash memory itself are declining by as much as 60%, although have recently enjoyed a little rally. But that rally will probably end soon, believes iSuppli analyst Nam Hyung Kim, prompting his firm to downgrade its NAND market rating even further, from "neutral" to "negative."

The DRAM market outlook for the near term is also being downgraded, but for different reasons. Now that inventories and price conditions have reached optimal levels, Kim believes, "the DRAM industry has nowhere to go but down."

As DRAM prices start to decline again, with DRAM suppliers also controlling 78% of the world's NAND flash capacity as well, DRAM conditions will have a subsequent effect on NAND - which, by iSuppli's forecast, was already heading south.

"The quick revision of iSuppli's rating," the company stated yesterday, "merely reflects the volatile market conditions for this volatile form of memory."