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| Gartner Dataquest Says DRAM Industry Must Brace for Consolidation in 2002 |
| After a Record Decline in 2001, the Industry Will Contract Again Next Year |
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TOKYO, October 18, 2001 - Worldwide DRAM revenue is on pace to decline 67 percent in 2001, and it will continue to struggle in 2002 as revenue will drop an additional 19 percent, according to the latest projections by Dataquest, Inc., a unit of Gartner, Inc. (NYSE: IT and ITB). As market conditions worsen, Gartner Dataquest analysts said industry leaders must prepare for consolidation.
Worldwide DRAM sales are on pace to reach $10.5 billion in 2001, a significant decline from 2000 revenue of $31.5 billion. In 2002, revenue is expected to reach only $8.5 billion. This is a stark contrast to 1995 when the DRAM industry peaked with revenue of $41.8 billion. "The omens are bad for the DRAM industry next year," said Andrew Norwood, senior analyst with Gartner Dataquest's Semiconductors group. "All DRAM companies are now losing money and will do so until the fourth quarter of 2002. Some vendors may not even survive that long. "In the last few months, some companies have announced small production cutbacks, but we had hoped to see substantial cuts by the major companies," Norwood said. "No company wants to take the initiative for the fear of losing market share - so now they are all going to suffer in 2002." Gartner Dataquest analysts said some companies are already on life-support systems. Hynix Semiconductor of South Korea is being kept afloat by its creditors in the hope that the market will recover in 2002. Others, such as Samsung Electronics, are in a stronger position because of their dominance in the market. Yet others, such as Toshiba of Japan, are looking at how to exit the DRAM business. "Toshiba of Japan is investigating a possible memory joint venture with Infineon," Norwood said. "When the market recovers, we may find that there are only four major DRAM players and not the current six." It's not too late for a possible upside to 2002, but it will be consolidation that makes this happen. "If we saw a major manufacturer go under, things would change fast," Norwood said. "Then we could see market revenue grow significantly in 2002." Both 2001 and 1985 market crashes were brought about by sudden declines in demand and increasing inventories. In 1985, it was the end of the home computer boom; today, it is the slowing growth in PC shipments and inventory build-up that started in 2000. The events of September 11 have added to the problems in the DRAM market. While the DRAM industry struggles, this has turned into good news for PC companies and end users who can now get memory for their computers at rock bottom prices. "Today you can buy 256 megabytes of memory for under $30 compared to $230 12 months ago," Norwood said. "With DRAM prices now well under the costs of production, end users are getting something for nothing. It is as if the DRAM companies are unwillingly subsidizing every PC sold by more than $40." Additional information on this market is available in the Gartner Dataquest Perspective "DRAM Forecast: The Omens Are Bad." This Forecast Analysis examines the current conditions in the DRAM industry and the industry outlook for 2002. This document is available to clients of Gartner Dataquest's Semiconductor Industry Worldwide cluster research. This service provides analysis of the semiconductor industry on a regional and worldwide basis. Focusing on semiconductor markets and products, the service provides insightful commentary on industry trends and statistics. More information about the service can be found on Gartner's Web site in the Semiconductor Focus Area at www.gartner.com/1_researchanalysis/focus/semimkt_fa.html. Gartner Dataquest analysts will examine the outlook for industry at the Gartner Dataquest Semiconductors 2001 conference November 8-9 at the Westin Hotel in San Francisco. During the conference, Gartner Dataquest analysts will discuss where the market is headed and what changes are needed in business models to be profitable in 2002 and beyond. More information on the conference, including the agenda and registration information, are on Gartner's Web site at www.gartner.com/2_events/conferences_briefings/conferences/scon5.jsp. Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software and services sectors of the global information technology industry. Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Conn., and has 4,600 associates, including 1,400 research analysts and consultants, in more than 80 locations worldwide. The company achieved fiscal 2000 revenues of $855 million. For more information, visit www.gartner.com. |
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Contact: Tom McCall 408-468-8312 tom.mccall@gartner.com |
Contact: Laurence Goasduff + 44 1784-487-195 laurence.goasduff@gartner.com |
