IDC Bullish on DRAM—For Now

Researcher IDC issued a cheery forecast for the worldwide DRAM (dynamic RAM) market, predicting that revenues will rise for the next two years.

In a report issued Wednesday, IDC, based in Framingham, Mass., said that DRAM revenues will grow both in 2004 and 2005, then start to decline as overproduction leads to declining prices. In 2003, DRAM revenues will reach $16.5 billion in revenue, growing to $24.7 billion in 2007, said IDC.

The kicker, however, will be the amount of DRAM each manufacturer supplies. As production goes up, the available supply of DRAM increases and prices decline. Die shrinks and other manufacturing improvements also increase the number of DRAM dice per wafer, leading to corresponding price drops.

In 2004 and 2005, IDC predicts, DRAM manufacturers will be able to manage production and pricing. Meanwhile, the amount of memory in bits required by customers will grow at a 40 percent compounded annual rate, driven by PCs, PDAs and an emerging market for smart phones. In 2005, however, expanding production by 12-inch fabs will lead to an oversupply of DRAM, and the market will slow down, said IDC.

The decline in prices will be partially offset by shifts to new, faster DRAM, which will create smaller microeconomies based on the limited number of the new chips. In 2004, Intel will begin to produce its first chip sets using DDR-2 DRAM, while Japans Elpida Semiconductor and Micron Technology Inc. have already announced that they have begun production on their next-generation, higher volume parts. DDR-2 DRAM will command over 70 percent of the market in 2007, IDC predicts. DDR-2 will also receive some challenges from XDR or XDRAM, the successor to Rambus Inc.s RDRAM, IDC said.

PCs will begin to consume about a gigabyte of main memory on average in 2007, leading to a shift in DRAM chip density from 512Mb to a 1Gb at the end of 2006.