SAN FRANCISCODRAM vendors engaged in a dangerous game of chicken in 2008, spending big to increase capacity in an effort to take market share and daring competitors to blink first, according to market research firm iSuppli Corp. Nobody won.
"Using this the strategy, DRAM makers hoped that their competitors would be forced to back out of the spending race and concede market share," said Nam Hyung Kim, director and chief analyst of memory ICs and storage for iSuppli, in a statement. "However, in 2008, no one won this game of chicken, with players continuing their massive spending drive amid weakening demand, contributing to oversupply, price declines and a massive market downturn that is hurting all suppliers."
Global DRAM revenue fell by 19.8 percent in 2008 to $25.2 billion, down from $31.5 billion in 2007, according to iSuppli's estimates. This will mark a second year of decline following the 7 percent drop in 2007, the firm said. DRAM revenue is projected to drop by another 4 percent in 2009 due to global economic uncertainty, iSuppli said.
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"The industry, which has been in decline for seven straight quarters, is in a stage of emergency with massive layoffs and production cuts," Kim said. "The top eight DRAM suppliers have lost nearly $8 billion since 2007, and their total operating loss is expected to amount to $11 billion by the end of next year."
ISuppli said it "cautiously" predicts that the market will turn around in the second half of 2009 due to suppliers' rapid reduction in capacity growth. In the near-term, iSuppli believes that prices will stabilize from the current level, and suppliers' losses will be reduced regardless of whether suppliers receive rescue packages from other parties.