Despite steady sales volume, DRAM memory chip vendors will see their revenue growth slow dramatically in 2007 thanks to a slump in prices, according to a recently report.
The price of DRAM chips, which are used to store data in PCs and other electronic devices, has typically dropped by 30 per cent each year. But in 2006, revenues swelled as prices dropped only 13 per cent, according to the report from iSuppli.
The market will return to its usual behavior in 2007, with prices forecast to drop 31 per cent. That would lead to a predicted revenue increase of 11.3 per cent in 2007, far short of the 33.6 per cent increase in 2006, iSuppli analyst, Nam Hyung Kim, said.
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 such as Apple's anticipated iPhone.
Still, DRAM sales are increasing so fast that the market will generate total sales of $US36.95 billion, the highest level since 1995. Unit shipments of DRAM, measured in millions of 256MB-equivalent chips, would 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 US Department of Justice (DOJ) announced that an executive at Samsung Electronics would serve 10 months in prison and pay a $US250,000 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, HP, Apple Computer and Gateway 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, Elpida Memory and Infineon Technologies.