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DRAM bouncing back, report says

After several tough years for the industry, IDC says dynamic RAM sales will rise in the next two years.

The dynamic RAM market is making a comeback, a new report from IDC says.

DRAM manufacturers, which mainly supply memory for personal computers and servers, should see revenue increases over the next two years, thanks to higher demand for DRAM from PCs and handheld devices and tighter controls on supply, according the report, which IDC issued this week.

IDC said a market upturn, which showed signs of beginning this year, will boost DRAM revenue in 2004 and 2005.

The news, similar to recent predictions by the Semiconductor Industry Association (SIA), should cheer DRAM makers, who slogged through a downturn in 2001, 2002 and a good part of 2003, due to the world economic slowdown and its affects on the PC market. Many manufacturers slashed prices during the period in an effort to sustain sales.

It may not please PC makers or their customers, however, as both have taken advantage of the low prices on memory. The lower prices have helped computer makers' margins and enabled customers to increase the amount of RAM installed in their PCs on the cheap.

But rising revenue also means that a bust could be around the corner. IDC predicts that increases in capacity, brought on by the transition to 12-inch wafers, will lead to an oversupply and thus hurt revenue in 2006 and 2007.

Like other chipmakers, DRAM companies have begun shifting the size of wafers--silicon discs they use to manufacture chips--from 8 inches to 12 inches. The larger wafers increase manufacturing output.

But, even with the expected dip after 2005, IDC predicts that DRAM revenue will grow from $16.5 billion in 2003 to $24.7 billion in 2007.

The SIA offered a slightly different picture in November, when it predicted that DRAM revenue would grow 7.9 percent to $16.5 billion in 2003 and 35 percent to $22.2 billion in 2004, before shrinking by 20 percent to $17.8 billion in 2005. The SIA added that DRAM would rebound again in 2006, with revenue rising 30 percent, pushing the market to $23.1 billion.

Despite the notoriously cyclic nature of the DRAM industry, neither the SIA's nor IDC's forecasts predict a major downturn.

DRAM and most of the other chip categories included in the SIA forecast are expected to leave behind the woes of 2000 and 2001, following a more traditional semiconductor market pattern of three years of growth followed by two to three years of decline.

The memory market and most of the other chip categories included in the SIA forecast are on track to follow a traditional semiconductor market pattern of three years of growth followed by two to three years of decline, the SIA has said.