DRAM market to get worse before it gets better – analyst

Don't expect the DRAM market to improve any time soon. The much anticipated recovery isn't going to happen before Q2 next year, analysts at Korean market watcher Meritz Securities have warned.

And the market will get a lot worse before it gets better, the company said, cited by the Korea Herald. The major manufacturers are in for a particularly tough time come Q1 2002.

Meritz cites a number of factors behind its bleak prognosis, but mostly its about low demand. For example, ongoing concern about the state of the world's economies is dampening corporate enthusiasm for new PCs. And the traditional boost given to PC sales by the new school term in September in the US and Europe is likely to be subdued while users await the arrival of Windows XP a month or so down the line.

Other applications requiring DRAM chips, such as cellphones and networking kit, are unlikely to provide any scope for increased sales either.

While demand remains weak, Meritz reckons, the major DRAM players will shift their attention from competing on price - which doesn't, after all, appear to be getting them anywhere - to focus on inventory reduction. That will kick prices down even further.

"Samsung Electronics and Micron are likely to focus on reducing their inventory level rather than managing their prices, which can have an adverse impact on cash-strapped chip-makers and possibly spark an abrasive price-cutting war," says Meritz' report.

That will lead to "dire" market conditions around February and March next year, after which point the industry's retrenchment, rather than increasing demand, will start to improve business conditions, Meritz said. ®