SRAMS prices will fall for a second consecutive year in 2002 because demand will remain sluggish due to weak networking equipment shipments.

The SRAM market was hit hard by last year's electronics industry downturn. SRAM revenue fell 42% from $6.5 billion in 2000 to $3.8 billion in 2001, according to market researcher IC Insights. At the same time, prices dropped an average 21% due to a glut of parts as demand fell from key end equipment markets including cell phones, networking equipment and computers.

Bad news for SRAM manufacturers is that 2002 won't be much better. Forecast sees the SRAM market falling to $3.2 billion as prices fall another 16%. However, tags will rise at the end of the year.

"It's a big climb out of the hole we dug ourselves into last year," says Brian Matas, an analyst with IC Insights. "Even if we have aggressive growth in the second half of the year, it will get us back to just flat on a year over year basis," he says.

Longer term, however, the SRAM market should rise again as higher density devices are designed into third generation (3G) cellular phones and the networking equipment industry rebounds.

The SRAM market is expected to increase 20% to $3.9 billion in 2003 and grow 25% to $4.7 billion in 2004, according to Matas.

"Right now, there is excess capacity, so prices will fall this year," says Matas. "In 2003 demand will increase and will be more in balance with supply. In fact demand will pick up and may surpass available supply, which means prices would rise," he says.

The communications industry should have a big impact on the SRAM market in the next few years because both wireless and data communications will likely use more SRAM.

"Until recently SRAMS were more synonymous with PC cache memory. They are still produced for cache, but SRAMS are now a more embedded feature on a microprocessor," says Matas. " SRAM makers started to look elsewhere several years ago and they saw a gold mine in communications systems."

He says cell phone manufacturers are increasing SRAM content. "There was about six megabits (Mb) of SRAM memory per handset in 2001 on average. We think that will go up to eight or 16 Mb in the next several years," says Matas. SRAMS have low power consumption and a small footprint which will help the SRAM market stay viable for communications applications."

Cell phones use slow SRAMS, memory with access times of 30 nanoseonds (ns) or slower. Slow SRAMS dominate the SRAM market.

About 740 million slow SRAMS shipped in 2001 compared to about 203 million fast SRAMS. That breakdown probably won't change in 2002 because networking equipment is the primary user of fast SRAM and sales of networking equipment will likely be sluggish in 2002 while cell phones are expected to pick up.

SRAM suppliers are optimistic about 2002, as market conditions have improved over 2001. "The bigger customers are starting to purchase parts again," says Steve Wanger, product marketing manager for Samsung Semiconductor. "Last year we had a huge inventory because, in 2000, overbuying created a glut in our market. The inventory has all but dried up. In most cases we are seeing SRAM purchasing pick up again. The cell phone segment is picking up more than networking," he says.

For that reason SRAM manufacturers say prices should firm and then rise toward the end of the year. "The cell phone and networking segments are coming back and inventory is depleted," agrees Tom Quinn, vice president of marketing for Samsung. SRAM prices usually lag DRAM prices by four to six months, he says.

"The DRAM market has been moving up fairly aggressively since the end of 2001. We anticipate that SRAM market pricing will pick up." He adds that SRAMS compete with DRAMS and nand flash for wafer starts. Wafer starts are tied to what will generate the most revenue for a company.

"If the market continues the way it looks, then SRAM pricing will have to go up because it is competing with these other products," and supply could be tight, he says.

"The SRAM market is interesting because there is such a range of pricing," says Quinn. "Low-end stuff can have very low-end prices, but the high end can have very attractive prices (for suppliers). The range would be 40 cents for 256K, to $150 for Samsung's high-end high-speed Ultrasynch product.

Cell phones are major end markets for SRAMS, and next generation phones will have a big impact.

"The movement toward 2.5G and 3G phones means customers will need more and more memory,"' says Hiroyuki Goto, senior manager for memory engineering and marketing for NEC Electronics. "Japanese cell phone companies early last year were using 8 Mb densities, but in second half the trend was to 16 Mb. Now they are looking for 32 Mb. Space limitations mean they don't want a lot of memory chips on their boards," says Goto. Instead these companies want to use single higher-density memory devices.

As more 3G phones ship, they will use 64 Mb SRAMs as well as other memory chips including DRAM, nor flash, nand flash, and RAM.

"The cell phone is not just a cell phone anymore," says Goto. "Downloading files, MP3 music, video, all multimedia forms requires more memory. At the same time, it's still a phone, so basic functions, such as communications, require conventional type memory," he says.

Quinn of Samsung agrees that cell phones will have a big impact on SRAMS, but says over the longer term SRAM may be phased out of cell phones.

"As cell phones morph into more than voice products, we see architectural changes occurring with them." he says. "They will move from structures based on nor flash and SRAM and migrate to nand flash and DRAM for mid- to high-end cell phones. That will have a major [negative] impact on SRAM demand."

Samsung, which has about 30% of the SRAM market, would obviously be affected. However, the company also makes DRAM and flash so it probably would not be hurt by the shift to different memory technologies.

"The bottom line is the SRAM market is maturing and coming under fire from other products. Some mainstays like cell phones will go away in the high end," Quinn says.

A trend that buyers should watch is the movement toward multichip package (MCP). MCP contains several memory DRAM, SRAM, flash—stacked in a single package.

"We make SRAM, DRAM, nand and nor flash in die form, stack them vertically, bond them out internally and put them in a single package," says Quinn. "Mostly it is going to small form factors in Asia like cell phones and PDAs."

He says MCP will also be used in various handheld devices such MP3 players, PDAs, and Game Boys, anything that has memory requirements and small space.