Worldwide Memory Forecast, 4Q03 (Executive Summary) Executive Summary Publication Date: 10 December 2003
Authors Richard Gordon Andrew Norwood This document has been published to the following Marketplace codes: SEMC-WW-EX-0306 For More Information... In North America and Latin America: +1-203-316-1111 In Europe, the Middle East and Africa: +44 1784 267770 In Asia/Pacific: +61-7-3405-2582 In Japan: +81-3-3481-3670 Worldwide via gartner.com: www.gartner.com Entire contents 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. 118699
Worldwide Memory Forecast, 4Q03 (Executive Summary) Introduction Gartner Dataquest estimates that worldwide memory sales totaled $28.4 billion in 2002. Revenue growth occurred in only two markets: dynamic RAM (DRAM) and NAND flash. The markets for static RAM (SRAM), NOR flash, erasable programmable read-only memory (EPROM), electronically erasable programmable read-only memory (EEPROM), mask read-only memory (mask ROM) and other memory all saw revenue declines in 2002. In 2003, all four major memory markets DRAM, SRAM, NAND flash and NOR flash will post revenue growth, which will result in total memory revenue reaching $33.4 billion, representing a growth rate of 17.5 percent over last year. Worldwide Memory Forecast Essentially Unchanged Since last quarter's memory forecast update, there has been little change in either current market conditions or in outlook see "Worldwide Memory Forecast, 3Q03 (Executive Summary)," SEMC-WW-EX-0283. However, in DRAM and in flash memory, some changes in the market conditions have affected the underlying forecast assumptions and the detailed forecast numbers, which are as follows: The DRAM revenue forecast for 2003 has been reduced from $18.9 billion to $18.1 billion, because our forecast for average selling prices (ASPs) in the fourth quarter of 2003 as well as annual bit growth have been edged down slightly. The DRAM revenue forecast has been reduced for 2004 from $28.1 billion to $26.6 billion and for 2005 from $36.9 billion to $36 billion, again because of minor adjustments to the forecast for ASPs and bit growth. The DRAM revenue forecast for 2006 and 2007 is essentially unchanged, resulting in a mild increase in the five-year compound annual growth rate (CAGR) from 8.6 percent to 10.4 percent. The NAND flash memory forecast has been revised upward (again), as strong demand continues to fuel bit growth while pricing remains firm because of constrained supply. NAND flash memory revenue is now forecast to grow by 60 percent to $3.8 billion compared with a growth of 42 percent and a revenue forecast of $3.4 billion in last quarter's update. Annual bit growth for 2003 is now forecast at 151 percent (compared with 130 percent last quarter), while our ASP assumptions for 2003 remain unchanged. Our assumptions for the rate of the long-term decline of NAND flash memory prices are largely unchanged, but we have raised our five-year CAGR for bit growth from 88 percent to 96 percent, which has increased the total available market (TAM) forecast in dollar terms each year through 2007. We have reduced the revenue forecast for NOR flash memory in 2003 from $7.3 billion to $6.7 billion; the main change was in our assumption for annual bit growth, which has been reduced from 66 percent to 55 percent. However, in the long term, we still forecast a five-year CAGR of 62 percent fornorflashmemorybitgrowth.this,incombinationwithanunchanged expectation for an annual average price decline of 25 percent, means that our TAM forecast remains at $15 billion in 2007. Detailed short-term and long term assumptions underlying the forecast statistics are contained in Tables 1 and 2. 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1
2 Worldwide Memory Forecast, 4Q03 (Executive Summary) Table 1 Underlying Memory Forecast Assumptions, Short-Term Outlook Economy/Politics - U.S. GDP growth subsides in the fourth quarter of 2003 but averages 4 percent throughout - The global economy improves, but the timing and magnitude of recovery varies among regions. Underlying Market Conditions - Reduced supply helps to increase pricing levels above production costs. - Industry maintains reduced capacity forecast and benefits from strong market. Demand Drivers - Modest replacement purchasing of PCs is apparent in the professional market in the fourth quarter of 2003 and graduallygainstrengthin subsequent quarters. - Strong replacement purchasing of consumer PCs is evident in - Worldwide PC unit shipment growth is 11.3 percent in - U.S. GDP growth subsides in the fourth quarter of 2003 but averages 4 percent throughout - The global economy improves, but the timing and magnitude of recovery varies among regions. - With the exception of the digital cellular handset, weak demand from the communications sector continues to hold back the market in 2003. - Signs of improving market conditions, especially in the important wired communications sector, are expected early in - Worldwide digital cellular handset unit production growth is 10 percent in 2003, followed by 11.3 percent in - Worldwide digital cellular handset unit production volume is 460 million in 2003 and 512 million in - U.S. GDP growth subsides in the fourth quarter of 2003 but averages 4 percent throughout - The global economy improves, but the timing and magnitude of recovery varies among regions. - Healthy digital cellular handset unit production, coupled with a sharp increase in code storage flash content, continues to drive strong bit growth in 2003. - In 2004, a broad-based electronic equipment production recovery will benefit the market for "commodity" NOR flash memory across a wide rangeofdevicedensities. - Worldwide digital cellular handset unit production growth is 10 percent in 2003, followed by 11.3 percent in - Worldwide digital cellular handset unit production volume is 460 million in 2003 and 512 million in -Inhandsets,colorLCD screens, digital cameras, packetized data capability (for example, GPRS) and new applications (for example, Java Applets) are driving a sharp increase in the number of flash bits required for both code and data storage. - U.S. GDP growth subsides in the fourth quarter of 2003 but averages 4 percent throughout - The global economy improves, but the timing and magnitude of recovery varies among regions. - Demand surpassed the ability of the industry to supply in the third quarter of 2003. - The market will remain undersupplied through 2003 and into - Allocation will be a feature of the market through 2003 and into - Additional capacity and new entrants could begin to close the gap between supply and demand by the second quarter of - Demand for digital consumer electronics and the installed base of PCs continues to drive the proliferation of removable solid-state storage devices (for example, flash cards and USB flash drives) for data storage and transfer.
Worldwide Memory Forecast, 4Q03 (Executive Summary) 3 Table 1 (Continued) Underlying Memory Forecast Assumptions, Short-Term Outlook Density Transition - The move to the 512Mb density will be modest. The 256Mb device will remain the largest-shipping density through 2003 and New Technology - Demand for DDR2 SDRAM will be insignificant until the end of RDRAM will account for less than 3 percent of the market during 2003. Its price premium over DDR SDRAM will fall. Production and Investment - DRAM vendors stick to reduced production plans and benefit from improving pricing conditions. - Increasing device density requirements in the handset fuel a shift from 4Mb and 8Mb low-powersramto16mb and 32Mb pseudo SRAM. - In the synchronous SRAM arena, variants such as DDR, QDR and sigma RAM are being targeted at high-speed, high-bandwidth applications such as networking. - Leading SRAM vendors shift production to the 0.13-micron process node to reduce cost and increase device performance. - The move to higher densities is continuing apace. 64Mb will be the highest-volume shipping density in - MLC technology is gaining share of bit shipments as Intel pushes StrataFlash into the handset market. - MBC technology, typically based on a nitride process, is being introduced and ramped to volume production in 2003 (for example, Advanced Micro Devices' MirrorBit). - Multichip packaged devices (incorporating more than one NOR flash die or SRAM or both,pseudosramand DRAM die) are commonplace and are featured in an increasing number of new cell phone designs. - The move to MLC and MBC technology by leading NOR flash vendors will increase bit supply in 2003. - The move to higher densities is continuing apace. 256Mb will be the highest-volume shipping density in 2003, with the 512Mb taking a higher market share in - MLC technology is being introduced by Toshiba and SanDisktoenableveryhighdensity product offerings (for example, 512Mb and above). - Leading vendors will shift production to the 0.11-micron process node during 2003 and - New vendors plan to enter the market in 2004 for example, Micron, Infineon (with NROM technology), and the announced joint venture between Hynix and STMicroelectronics. -SomeDRAMproduction capacity is being converted to NAND flash memory.
4 Worldwide Memory Forecast, 4Q03 (Executive Summary) Table 1 (Continued) Underlying Memory Forecast Assumptions, Short-Term Outlook Pricing - Price rises seen in the early second half of 2003 are maintained throughout the second half because of the usual seasonal increase in demand. - In the first quarter of 2004, pricing falls sharply before experiencing mild quarterly declines for the remainder of the year. - Sluggish electronic equipment production across the board will continue to hold back SRAM demand and keep downward pressure on ASPs during 2003. - As 2004 gets under way, improved electronic equipment production levels will increase demand for SRAM devices, resulting in an improved pricing environment. -MuchofNORflashshipment volume (for example, sales to the cell phone handset sector) is covered by long-term agreements, and thus, pricing of high-densitydevicesisrelatively stable. - Prices are expected to improve across the board late in 2003 and into 2004 as continued strong demand helps to burn off overcapacity. -Demandwillcontinuetooutstrip supply in the second half of 2003, keeping prices firm. - In 2004, additional capacity brought on line by established vendors and new market entrants will bring with it resumed downward pressure on pricing. DDR = Double data rate GDP = Gross domestic product GPRS = General packet radio service LCD = Liquid crystal display Mb = Megabit MBC = Multibit per cell MLC = Multilevel cell RDRAM = Rambus dynamic RAM SDRAM = Synchronous dynamic RAM USB = Universal Serial Bus Source: Gartner Dataquest (November 2003)
Worldwide Memory Forecast, 4Q03 (Executive Summary) 5 Table 2 Underlying Memory Forecast Assumptions, Long-Term Outlook Economy/Politics - A recovering global economy beginning in 2004 will lead to increased consumer spending and increased capital spending by businesses in Underlying Market Conditions - A corporate PC replacement cycle will result in a healthier market for DRAM in 2004 and - Although unlikely in the midterm, further industry consolidation around three or four major vendors may be necessary to sustain a viable market long term. Demand Drivers - As the PC sector has become a replacement market, the lack of a "killer application" for DRAM will inhibit bit growth in the long term. - Low-power DRAM will begin to penetrate the market with the adoption of high-end mobile terminals. - A recovering global economy beginning in 2004 will lead to increased consumer spending and increased capital spending by businesses in - Integration of low-density SRAM (up to 8Mb) into system-on-a-chip designs is likely to cannibalize the market for discrete components. -Replacementofhigherdensity asynchronous SRAM (16Mb and greater) by lowpower DRAM, especially in digital cellular handsets, will hold back bit growth. - A return to healthier levels of production of networking equipment will drive the market for high-speed synchronous SRAM. - A recovering global economy beginning in 2004 will lead to increased consumer spending and increased capital spendingbybusinessesin - 2.5-generation and thirdgeneration mobile handsets will be rolled out through 2007, enabling compelling data-centric mobile applications. - The convergence of mobile applications, such as handsets, PDAs, cameras and Internet audio players, will continue, driving demand for code and data storage flash bits. - NOR flash memory will remain the technology of choice for code storage in digital cellular handsets. - A recovering global economy beginning in 2004 will lead to increased consumer spending and increased capital spending by businesses in - Despite rapid expansion in terms of megabytes, the market will remain fiercely competitive, with any sign of price stability likely to attract new market entrants. Accelerated cost-per-bit reduction will be the norm, so that bit growth will continue in the face of retail channel pricing dynamics. - Removable solid-state storage devices will become ubiquitous. - An increasing number of cell phone handsets will incorporate a slot for a removable data storage device. - NAND flash is likely to struggle as a competitive technology in code execution applications.
6 Worldwide Memory Forecast, 4Q03 (Executive Summary) Table 2 (Continued) Underlying Memory Forecast Assumptions, Long-Term Outlook Density Transition - The highest-volume shipping device density is forecast to be 1Gb by 2007. - Module granularity concerns may dictate the speed of density transitions and product mix by configuration (x8, x16 and x32) at any given time. New Technology - MRAM could emerge as a viable universal memory technology to pose a competitive threat to DRAM. Production and Investment - Strengthening market conditions in 2004 and 2005 will lead to improved semiconductor industry profitability, which, in turn, will lead to increased CAPEX. - A supply-side-driven downturn is forecast in 2006. Pricing - The pricing environment is forecast to be more favorable for memory vendors in 2004 and 2005, as pent-up demand hits the market in the face of tight capacity. CAPEX = Capital expenditure Gb = Gigabit MRAM = Magnetic RAM Source: Gartner Dataquest (November 2003) - The market will remain fragmented, with significant annual unit shipment volumes of device densities ranging from 1Mb to 64Mb. - The highest-volume shipping device density is forecast to be 16Mb by 2007. - MRAM could emerge as a viable universal memory technology to pose a competitive threat to SRAM. - Strengthening market conditions in 2004 and 2005 will lead to improved semiconductor industry profitability, which, in turn, will lead to increased CAPEX. - A supply-side-driven downturn is forecast in 2006. - The pricing environment is forecast to be more favorable for memory vendors in 2004 and 2005, as pent-up demand hits the market in the face of tight capacity. - The highest-volume shipping device density is forecast to be 256Mb by 2007. - MRAM could emerge as a viable universal memory technology to pose a competitive threat to NOR flash. - Strengthening market conditions in 2004 and 2005 will lead to improved semiconductor industry profitability, which, in turn, will lead to increased CAPEX. - A supply-side-driven downturn is forecast in 2006. - The pricing environment is forecast to be more favorable for memory vendors in 2004 and 2005, as pent-up demand hits the market in the face of tight capacity. - The highest-volume shipping device density is forecast to be 2Gb by 2007. - MRAM could emerge as a viable universal memory technology to pose a competitive threat to NAND flash. - Strengthening market conditions in 2004 and 2005 will lead to improved semiconductor industry profitability, which, in turn, will lead to increased CAPEX. - A supply-side-driven downturn is forecast in 2006. - The pricing environment is forecast to be more favorable for memory vendors in 2004 and 2005, as pent-up demand hits the market in the face of tight capacity.
Worldwide Memory Forecast, 4Q03 (Executive Summary) 7 For the full report, see "Worldwide Memory Forecast, 4Q03," SCSI-WW-MS-0211.