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Continued overcapacity in the DRAM and NAND memory markets has not been resolved by earlier announcements in 2008, by a large number of producers that new fab capacity would be put on hold with the focus on bit growth via technology node migrations. Such efforts have done little to bring about a supply/demand balance, made more difficult by softening global demand as consumers in major markets such as the U.S. feel the effects of the credit crunch.

Powerchip Semiconductor Corporation (PSC) has been the first of the major DRAM producers to publicly announce that actual DRAM production would be cut. PSC’s Chairman, Frank Huang, cited that 2008 had turned into the worst year in the DRAM business he has experienced in 17 years of being in the semiconductor industry.

PSC said that it would cut DRAM production by 10 to 15 percent and restrain from further new fab construction until better times. The production cuts are estimated to relate to a reduction in wafer production of approximately 15,000 300mm wafers per month.

Hot on the heals of PSC’s announcement, Hynix Semiconductor said it was cutting production of NAND flash at its M8, one of its 200mm fabs in Cheongju, Korea by as much as 30 percent, while another 200mm fab M9 will stop NAND flash production altogether in October, 2008.

The key reason for the move is the inability to migrate NAND flash production on 200mm equipment to remain competitive with leading-edge 300mm fabs. Hynix is however currently ramping its latest 300mm fab for NAND flash production.

The moves by Hynix and PSC on there own are not expected to positively impact the oversupply situation. According to market watchers that would need a wider number of memory manufacturers to cut production in the coming months and could take up to 6 months afterwards before a return to a supply/demand balance.