iSuppli: Memory market will stall in 2005

Worldwide revenue from DRAM, the memory found inside computers, will grow a whopping 56.2 percent to reach $26.7 billion in 2004, according to research company iSuppli. But next year, revenue will grow a marginal 1.3 percent.

The slowdown can already be seen in third-quarter results. Revenue from the second quarter only grew 0.7 percent, rather than the expected 7 percent, the company said. Megabit shipments increased by 11 percent, but average prices declined by 10 percent.

Several analysts and companies believe that 2005 will be fairly static for the chip industry. Companies in the past few years have invested heavily in factory equipment, which will lead to excess supplies of chips and price competition. Nonetheless, demand for electronics could buoy the industry.

"It's warning for a downturn," Dan Hutcheson, CEO of VLSI Research, wrote in a recent version of The Chip Insider, an industry newsletter. Yet "people have been scrambling to find Sony PlayStations, and the parking lots have been full of people trying to figure out how to stuff large LCD TVs into their Hondas. That's why I'm sticking to the optimistic side for 2005."

The chip industry goes through these cyclical down periods every two to three years. The industry enjoyed a huge surge of revenue in 1999 and 2000, only to collapse in 2001. In the midst of the slump in late 2002, National Semiconductor CE0 Brian Halla gamely predicted that the business would pick up again--on June 21, 2003, precisely, a date derived by applying a mathematical model from Ahmad Bahai, a professor at Stanford University.

The prediction was made as a bit of keynote speech theater at the Comdex Fall 2002 conference, but shipments began to pick up toward the middle of 2003, and by the end of the year, shipments had hit $166.4 billion, an 18.3 percent increase over the previous year.

The Semiconductor Industry Association predicts that global industry revenue will hit $213.8 billion in 2004, which would be a 28.5 percent jump over 2003. The figure would also surpass the record sales mark of $204 billion set in 2000, the association said.