Expect higher DRAM prices in 2010
Cutbacks in capital spending will doom efforts to cut chip prices
By Jim Carbone -- Purchasing, 12/17/2008 2:32:00 PM
Buyers can expect DRAM prices to surge in 2010 because DRAM manufacturers have drastically slashed capital expenditures, according to researcher IC Insights. In 2008-2009, DRAM manufacturers will spend less than $17 billion in capital expenditures, down from $34.3 billion in the 2006-2007 timeframe. Now, the amount DRAM producers plan to spend in capital investments in 2008-2009 is $2 billion less than they made in 2004-2005.
In a new report, Bill McClean, president of IC Insights, says the DRAM segment has always been volatile in terms of investment in capital spending. The industry tends to overspend when business is good and then drastically cuts back during downturns. In 2006 and 2007, DRAM manufacturers overspent, building new production facilities and adding capacity. The amount of capital spending on DRAM in 2008 and 2009 they reverted to their past bad habit of overspending for new production facilities. This overspending resulted in steep price declines for their products. Prices then declined, resulting in falling revenue and the current capex cutbacks. In 2010, DRAM demand is expected to rise because of pent-up post recession demand for new computer systems that use DRAM.
Also see: Spot market DRAM prices fall in China
IC companies cut capital spending
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