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It would seem that we are getting closer to a point where a major restructuring of the DRAM industry could occur. Last-gasp attempts by the Korean and Taiwanese Governments to support indigenous manufacturers through the crisis may lead to them imposing mergers and acquisitions to reduce supply and competition and eventually lead to ASP rises and a return to profitability.

Underlying the dire situation in the DRAM market is the view that Samsung will finally succumb to financial losses, resulting in all DRAM producers being stuck on a sinking ship. According to Gartner, the DRAM industry is in the midst of its worst ever crisis with a small but growing number on the brink of financial collapse.

DRAM spot prices on the majority of mainstream device types have gone below US$1.0 dollar that suggests even Samsung with its scale cannot make money.

DRAM contract pricing in November wasn’t that much better as ASPs continued to decline and, according to Gartner, hit record lows. Prices for mainstream 1Gb DDR2 declined by 25% to 99 cents, and for 512Mb DDR2 devices, prices declined by 23.9% to 63 cents.

With the low demand season upon us, coupled to an overall fall in demand from consumers as the economic crisis takes hold, only the third quarter of 2009 looks likely to bring back a short period of real demand. As the chart issued by Elpida Memory shows, the financial positions of the major memory manufacturers isn’t looking good. The one firm showing positive in this chart is Samsung.

Losses can therefore be expected to grow and spreadsheet preservation strategies for many will probably be insufficient to prevent businesses failing without mergers and acquisitions.

We have already seen moves by Qimonda to save cash, sell its share in Inotera and close 200mm fab operations. Hynix, Elpida and Micron have done the same but it could be argued that this has been too little too late and avoids the real issue of overcapacity due to too many players.

Of course some observers would expect the weakest to shut up shop completely, and fire sales undertaken as that is still cheaper than acquisitions. Inevitably, consolidation is going to happen before the end of 2009 as survivors by then will be so financially weak that only a few will be around to pick up the pieces.