Samsung sees DRAM prices falling, NAND flash rising

Demand for the iPhone, iPod, and other products is expected to drive up prices for NAND flash memory

Users looking for bargains in DRAM (dynamic RAM) for their PCs or laptops might see bargain prices within the next few weeks, but anyone looking for new USB (universal serial bus) flash memory sticks, iPods, or memory cards for digital cameras and other devices should think about buying soon.

The DRAM market is in oversupply right now and it might not recover until the second half of this year, said Chang-Gyu Hwang, president of Samsung Electronics' semiconductor business. Samsung is the world's largest producer of DRAM and NAND flash, and many industry watchers pay close attention to its market forecasts.

"We expect that in the second half of this year, some demand for Windows Vista will start accelerating," said Hwang, adding that demand for PCs armed with Vista, in addition to other products such as mobile phones, will drive up DRAM demand.

In NAND flash memory, demand is increasing earlier than normal for this time of year, and prices will continue to rise in the second half as the iPhone, iPod, and a host of other products hit the market, said Hwang.

"In the second half [of the year], I think NAND flash demand will be very strong," he said.

Apple's iPhone is a huge factor in the NAND flash memory market this year, he said, because "all the major phone makers are creating music phones" to compete with the device. He forecast heavy demand for 4GB and 8GB NAND flash this year, specifically for handsets, and said a lot of demand will come from other devices, including game machines.

The lesson for users may be that it's time to buy DRAM before prices rebound in the second half, and NAND flash products before prices rise further.

The price of the most widely used DRAM chips, 512Mb, 667MHz DDR2 (double data rate, second generation), has been slashed by more than half since the beginning of this year, to $2.92 per chip early Tuesday, according to DRAMeXchange Technology, which runs an online DRAM market.

Last year, DRAM prices surged 61 percent to end at $6.36 as PC makers started making Vista-capable PCs and stockpiled excess chips ahead of the launch of the new OS. But it turns out that PC makers stockpiled too many of the chips, causing a glut and massive price declines.

It takes two to four weeks for price movements on the DRAM market to trickle down to users, DRAMeXchange says, and price declines are not likely to continue for too much longer. At $2.92 per chip, some DRAM makers are losing money on the chips they make, and if the price drops much lower, the chips won't be profitable for anyone, therefore chip makers will try to hold prices around current levels.

The situation in NAND flash is far different. Chip prices are rebounding after nearly six months of declines.

The price of 8GB NAND flash memory chips rose to $8.21 per chip early Tuesday, up 23 percent from its low this year of $6.69, on March 20, according to DRAMeXchange. Prices will continue to rise. The Samsung executive said he's "very bullish on flash prices in the second half of the year," which should be warning enough for users in need of the chips.

Copyright © 2007 IDG Communications, Inc.

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