USA: Oversupply and plunging prices for DRAM and NAND flash have prompted iSuppli Corp. to downgrade its rating of near-term conditions for suppliers of such components to "negative," down from the "neutral" assessment the company has maintained since late March for NAND and since July for DRAM.

The Global Average Selling Price (ASP) for 512Mbit equivalent density NAND flash is expected to decline to 46 cents in the fourth quarter, down a double-digit 24 percent margin from 60 cents in the third quarter. In contrast, the 512Mbit NAND ASP increased by 8.4 percent in the third quarter and by 6 percent in the second quarter.

The decline in NAND pricing confirms iSuppli's forecast from summer that conditions would take a turn for the worse in the fourth quarter.

"The major cause of the price decline is a continuing oversupply of parts," said Nam Hyung Kim, director and chief analyst for memory ICs and storage systems at iSuppli. "The oversupply is being caused mainly by the South Korean memory manufacturers shifting production capacity from DRAM to NAND.

"The present weak conditions in the NAND market contrast markedly with the strong performance posted in the third quarter," Kim added. "Suppliers enjoyed a period of strong pricing in the third quarter. However, prices rose mainly due to reduced supply growth—not because of increased demand. iSuppli foresees no near-term recovery in NAND conditions, as the holiday build season draws to a close and sales stimulated by Christmas demand wane."

DRAM down in the dumps
About the only good thing to say about the DRAM market right now is that it couldn't get much worse. Poorer-than-expected third-quarter earnings results and slower-than-anticipated seasonal demand this month prompted iSuppli to downgrade the near-term DRAM market condition for suppliers to negative as well.

Market prices since September have been deteriorating and have fallen to less than cash costs. Pricing for 512Mbit density Double Data Rate 2 (DDR2) DRAM has been collapsing. In the Asia spot market, the prices declined to less than $1 this week. This likely will result in most DRAM suppliers posting losses in the fourth quarter.

The DRAM industry's average operating profitability is expected to continue to be negative in the first quarter of 2008. This means the market will record four consecutive negative quarters on an average basis.

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