DRAM, NAND prices to stabilize thanks to Core 2, Sony PSP2 :iSuppli

Posted by Scott M. Fulton, III

El Segundo (CA) - The end is in sight for the price decline in memory and the price meltdown in NAND flash, as new, next-generation market players enter the picture, according to an iSuppli forecast issued this afternoon. Some of the reasons are already well-known: When Intel announces its next-generation Conroe and Merom processors (now expected on 27 July), both Intel and AMD will reduce prices for existing CPUs. This in turn, believes iSuppli principal analyst Nam Hyung Kim, will generate rising demand for the DDR2 memory these CPUs require.

With rising demand comes bigger purchasing budgets, which change the very size of the market in question. "DRAM market fundamentals now are very sound," Kim said in a statement this afternoon, "with supply and demand in a state of balance." As a result, iSuppli is raising its near-term market rating for DRAM from negative - where it had been since April - to neutral.

Meanwhile, as Apple is expected to use higher-capacity NAND flash memory in its upgraded iPod nano line due this fall, iSuppli now has reason to believe that Sony will begin producing PlayStation Portable 2 units, along with a new personal media player in the second half of this year. Both Sony units, Kim told TG Daily this afternoon, should utilize between 8 and 10 GB of on-board, high-density NAND flash, while Apple's new nano is expected to include 8 GB.

But timing - if you happened to think it suddenly became less than everything one day when you weren't looking - remains everything. If Apple maintains its presumed schedule of a fall release for the new nano - which some analysts believe it will not do - and if Sony manages to sneak its PSP2 and PMP units out the factory door in time for Christmas, the two companies combined should manage to constitute 41% of global NAND memory supply in Q4 2006. Any delay by either manufacturer could lead to another depression in spot prices, Kim believes, which is why iSuppli retained its neutral rating on the NAND flash market as a whole.

Usually when two big purchasers lead a market - a situation some refer to as the "Wal-Mart/Target Syndrome" - those purchasers have the luxury of pretty much setting prices, and thereby keeping them low, to the point where suppliers are almost forced from the markets they lead. (Just ask Rubbermaid.) But in the case of Apple and Sony, Kim believes, their mutual turning up of the faucet will help dry up the oversupply problem that currently plagues the industry. Last year at this time, he said, when Apple introduced the nano, it changed the entire complexion of the NAND flash market with its huge demand. Just imagine how much impact two big buyers could have on the oversupply problem.

What's particularly interesting about Kim's forecast is that it treats the PSP2 and "PMP" as separate devices, not the same device as most others have speculated. A separate "PMP" would be a more direct competitor to the iPod nano, while an all-in-one PSP2 would have the virtue of being an extensive gaming unit, with a Web browser to boot. If the PSP2 were perceived sometime in 2007 as the #2 portable media player, supporters could use its gaming library as a fallback position. But Sony has typically assigned a different division to address the MP3 market, Kim pointed out to us, so it probably will not produce a merged device whose leadership is split between divisions.