Manufacturers selling memory for less than it costs

INCREASE IN DRAM production by South Korean manufacturers are causing prices to continue to crash, the CEO of market research firm iSuppli said.

Derek Lidow said that means the South Korean big boys will be forced to cut DRAM output next year meaning that the country faces the distinct possibility of losing its lead to Taiwanese suppliers.

Lidow said: "Prices now are below cash production costs for many supplies. Annual DRAM revenue growth peaked in March, and is in the midst of a deceleration that will continue until March 2008."

The whole industry is likely to suffer "double digit negative DRAM operating profit margins" in this quarter, he said. Profitability will hit the bottom towards the end of June.

The original equipment manufacturers (OEMs) have been squirrelling away stock at rock bottom prices so there isn't going to be DRAM light at the end of the tunnel for quite some time.

To look on the bright side, prices of NAND memory are showing some improvement. µ

	2002	2003	2004	2005	2006	2007	2008
Korea	41.26%	41.23%	43.47%	41.41%	39.61%	47.33%	46.09%
Taiwan/Chi na	17.47%	17.98%	20.30%	27.33%	32.37%	30.90%	34.78%
Others	41.27%	40.79%	36.23%	31.26%	28.02%	21.77%	19.13%

Regional shares of global DRAM
unit production (% of unit production) - iSuppli data