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In a not uncharacteristic move, the SIA tried to generate a bit of positive PR spin about the memory market in its latest May semiconductor sales report. Citing words of wisdom from Micron Technology’s latest financial conference call, the SIA claimed that DRAM demand remained strong, due to the continued increase in bit content for PCs that should see around a 50 percent growth and reach 2Gb per computer. Add to this the fact that DRAM sales were actually up 6.4 percent, compared to the industry’s 2.8 percent for May 2008, and you have a nice pretty picture! 

What wasn’t said was that the seasonal moves that start in 2Q to build inventory for the peak 3Q selling period have begun. ASPs are basically flat to trending down for DRAM, according to Gartner. The SIA did acknowledge that DRAM sales (due to lower pricing) were actually 20 percent lower than in May 2007.

Overcapacity in DRAM has been the culprit for severe price erosion for two years now and regardless of the 3Q expected demand spike, a balance between supply and demand remains elusive.

The NAND flash market isn’t helping matters, and is still suffering from a higher state of overcapacity than seen in the DRAM market. Once again, the SIA noted the 135 percent NAND bit growth expected in 2008, but the ASP declines are still horrendous.

Gartner has noted that NAND flash contract pricing this June plummeted nearly 20 percent from May. After the demand cycle in Q3, Gartner expects an oversupply situation to reappear in Q4. Continued oversupply is to blame and memory manufacturers have still to cut production further to prevent a continuation of falling ASPs.

Demand for memory remains good, however oversupply remains worse, with a little respite in Q3. Memory madness continues virtually unabated.