Overcapacity in both the DRAM and NAND flash markets has outstripped unit demand to such a degree that iSuppli Corp. has downgraded its rating of near-term conditions for suppliers of such components to ‘negative’ with recovery in prices not expected until 2Q08. 

“The major cause of the price decline is a continuing oversupply of parts,” said Nam Hyung Kim, Director and Chief Analyst for memory ICs and storage systems at iSuppli. “The oversupply is being caused mainly by the South Korean memory manufacturers shifting production capacity from DRAM to NAND. The present weak conditions in the NAND market contrast markedly with the strong performance posted in the third quarter. Suppliers enjoyed a period of strong pricing in the third quarter. However, prices rose mainly due to reduced supply growth—not because of increased demand. iSuppli foresees no near-term recovery in NAND conditions, as the holiday build season draws to a close and sales stimulated by Christmas demand wane.”

The market research firm expects DRAM prices to recover first due to the slowing of capacity additions and focus on node migrations helping to tighten supply overall, should no new expansions in capacity be made. NAND flash, however, is not expected to recover until 3Q08 due to continued capacity additions and falling ASPs.