Worldwide memory sales declined by 51 percent, to $27 billion, in 2001. A DRAM recovery in 2002 will be followed by recoveries in the rest of the memory markets in 2003. DRAM contract pricing trended lower in the second quarter of 2002, but this was not unexpected, because of the seasonally weak nature of the quarter.
As the semiconductor industry enters a period of stronger demand in the second half, DRAM companies are expected to maintain increased pricing levels (for both spot and contract pricing) through the rest of 2002 and into 2003. Firmer pricing, along with a return to healthier demand fueled both by PC unit-shipment growth and by growth in DRAM content per PC, will return DRAMs to revenue growth later in 2002 and in 2003. In May, Gartner Dataquest forecast that DRAM revenue could reach as much as $21.2 billion in 2002, a 78.4 percent increase over 2001, but slow first-half PC sales are forcing a downward revision of that DRAM forecast.
Longer term, revenue growth will continue in 2003 but is expected to slow in 2004 as overcapacity hits. Forecast revenue of $41 billion in 2004, or growth of 21 percent over 2003, is expected to be followed by a revenue decline of 47 percent in 2005. Finally, a cyclical recovery is forecast to begin in 2006, although revenue in that year is expected to fall another 20 percent.
Bleak SRAMs
The outlook in SRAM remains uncertain, at best and bleak at worst. Besides networking, there seems little to be optimistic about. Even in networking, sluggish corporate capital spending will likely keep it in the doldrums until 2003, postponing any meaningful SRAM demand from network equipment vendors.
Although cell phone handset production looks set to return to modest unit growth this year, it is in the area of increased memory content per handset that any opportunity for SRAM market growth will exist. But it's becoming clear that low-power SRAMs traditionally used in handsets are giving way to lower-cost pseudo-SRAMs or are losing design-in bits to increased chip set integration.
Despite recent stabilization in ASPs, SRAM revenue is forecast to decline 26 percent in 2002, from $4.4 billion to $3.2 billion. SRAM revenue growth is forecast to return in 2003, reaching $4.5 billion, for an annual growth rate of 37 percent. But long term, the compound annual growth rate to 2006 is forecast at 2.5 percent.
The NOR flash market has pulled back from its peak, declining by 33 percent in 2001, to $6.8 billion, from $10.1 billion in 2000. Most NOR flash consumption depends on cell phone handsets, so it's no surprise that weakness in mobile communications has cut demand for NOR flash.
Handset production expects to recover modestly this year, and that recovery, along with increased code and data storage capacity per handset, will rejuvenate flash megabyte growth. But the market is still over-supplied, with little easing of downward pricing pressure expected this year.
NOR flash revenues are forecast to fall another 20 percent, to $5.5 billion, in 2002 before a recovery cycle begins in 2003. As the market tightens next year, growth of 39 percent is forecast, putting revenues at $7.6 billion in 2003.
Longer term, the maturing NOR flash business is likely to become increasingly cyclical as supply/demand imbalances become a feature of the market. Revenues are forecast at $9.7 billion ahead of a cyclical downturn and recovery in 2005 and 2006.
Andrew Norwood is Senior Analyst of Gartner Dataquest (United Kingdom).
Memory Market Is On Comeback Trail
