View from Silicon Valley- Mar'05 Denali Memory Report
Denali sees, and reports, clearly where others cannot (or will not). In short, Denali sees no end to capacity increases
and does not agree the excess inventory from 2H04 has been consumed.
Increased capacity has already produced a 50% flash
y-o-y ASP decline. DRAM ASP's dropped 20%+ the week after Chinese New Year. Rather than bounce back, they declined
further in the ensuing 30 days.
Global CapEx is up but US CapEx is down (reported by the EDA Consortium). Also in the Denali report, global capacity utilization fell for the second consecutive
quarter. Fewer starts in March dictates fewer IC to sell in June and July. If 2H05 business is going
to be so strong, why are wafer starts declining?
Decide for yourself what falling ASPs, and a hoped-for
2H05 recovery, suggest about the prospects for Silicon Valley employment growth.
Here is Denali's latest commentary:
* * * *
Memory Industry Update:
While we’re waiting to see whether the chip business gets better before it gets worse as
we move further into 2005; as capital spending continues to shrink process geometries of the installed capacity and expand
300mm wafer output; and as the inventory overage inherited from 2004 still fills pockets of market weakness; we have to wonder
if the diverse views of the future all have before themselves the same ‘reality’ of what is happening in the industry.
It is hard to imagine a consistent view of 2005 and beyond. We think not.
Today, as it was last month, the forecasts for 2005 growth versus 2004, remain bunched in the band
+5 percent to –5 percent, or about $203B to $223B. Some refinements have appeared, in sub-product markets (e.g. DRAMs),
moving individual product forecasts up or down (in this case).
The other tough-to-forecast memory market, flash, is both growing rapidly in MB (estimates
run from 100-150 percent Y/Y growth in MB shipments, depending on forecaster and product specifics), but is also throttled
back by much lower selling prices in 2005 than 2004. Overall ASP per MB is off more than 50 percent from 2004, and that’s
just for starters. Few think that prices will stay put in 2005, despite strong demand for both NOR and NAND; there is too
much additional capacity coming on line from too many players, new and established.
Probably the best that can be said for 2005 today, in early April, is that business has not fallen
off a cliff, which, if there’s a seasonal rise in 2Q05, could be a good omen. The range of possibilities for 2005 has
narrowed, with much less chance of a serious downturn. Below is a snapshot of our greatest concern for 2005 as shown below
in Figure 1. DRAMeXchange DRAM Spot Price.
(Graph sent to subscribers...)
* * * * * * * * This is not a solicitation to buy or sell any stock, bond nor any other type
of security. Statistics shown are taken from sources believed to be reliable. The writer rejects any responsibility
for their accuracy, or lack thereof. Invest at your own risk. Consult a licensed investment professional before
making any investment.
