TAIPEI, TAIWAN: Major DRAM suppliers profited from their aggressive expansion in 2005 and this good fortune continued as the price of DRAM kept on going up in 2006. However, this boom did not come without consequences. This rapid growth in capacity, in addition to an over-optimistic projection on Microsoft Vista's demand for DRAM, has caused numerous industry suppliers much suffering since 2007. As those first-tier suppliers, who are finding it difficult to squeeze second-tier suppliers out, they will see intensified cost pressure.

DRAMeXchange analyst, points out that some DRAM suppliers are still considering the present DRAM depression as a best opportunity to expand their market share. "The DRAM market-share games is now shifting from a knockout to a marathon without a winner, and the whole business loses ", according to DRAMeXchange.

Driven by the increasing demand in 2006, the upping of DRAM pricing motivated major suppliers to budget heavily capex for expansion. Within less than a year, the sharper-than-expected DRAM price fell rapidly and eroded profit of many industry suppliers. For those who lagged behind in terms of process node, a weak cost structure has led to critical loss.

Pressures from capex and operation, as reflected in shrinking cash in hands (Cash & cash equivalents), prompted some DRAM suppliers to sell marketable securities for cash, or re-rent their 8-inch fabs after sales. As in 4Q07, those DRAM suppliers, which originally had relatively good cost structure, also recorded loss. Given that the cash in hand at these companies is rapidly declining, even those suppliers, who originally were supposed to grab more market share, now feel the pressure and a need to trim their capex in 2008 (instead of aiming at profitability), according to data from DRAMeXchange.

Despite DRAM suppliers are adjusting their strategy to preserve profitability, their gross margins are still being seriously eroded and some DRAM suppliers even found ASP edging to variable cost level. While industry players generally interpret a capacity scale back as putting white flag in this DRAM race, none of them has made such announcement.