GARTNER DATAQUEST FORECASTS 2001 WORST YEAR EVER FOR DRAM INDUSTRY; NEW REPORT PREDICTS REVENUE TO DECLINE 55.5% IN 2001.

The DRAM industry will experience its worst year ever in 2001, with worldwide revenue declining 55.5 percent over 2000, according to Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).

Worldwide DRAM revenue is projected to fall from $31.5 billion in 2000 to $14 billion in 2001.

"The last time we saw a DRAM revenue decline of this scale was in 1985 when the market declined 55.1 percent," said Andrew Norwood, senior analyst with Gartner Dataquest's worldwide semiconductors group. "Both 2001 and 1985 market crashes were brought about by a sudden decline in demand and increasing inventories. In 1985, it was the end of the home computer boom; today, it is the slowing growth in personal computer shipments and inventory build-up that started in 2000.

"The only thing that can save the DRAM industry from its worst year is if major companies like Samsung, Micron Technologies and Infineon Technologies announce production cut backs," Norwood said. "Eventually, the DRAM market will recover. 2002 will be a transition year, with low growth returning to the market, but 2003 should see the strongest DRAM market growth since the early 1990s."

DRAM pricing has declined by about 80 percent in the past 12 months. Gartner Dataquest analysts said that this week, spot market pricing for a mainstream 128Mb (megabit) device fell to less than $2, and even contract pricing has fallen below $3 -- that is under cost-of-production for most manufacturers. Most DRAM companies are making losses now, and this will continue into 2002.

"In a situation like this, you would expect to see companies exiting the market, but the cost of quitting the DRAM industry is high, and what do you do with the spare fab capacity," Norwood said. "You can sell your DRAM business, as Texas Instruments did in 1999 when Micron Technologies acquired its DRAM operation. Or companies could follow Motorola's example. In 1998, the company phased out of the DRAM market, but it continued to supply DRAM to its joint-venture partners for a period."

Gartner Dataquest analysts said there is some good new for computer users. DRAM pricing has fallen so dramatically that today an end user adding an extra 128MB (megabyte) of memory to their personal computer will have to pay less than $20 for a memory module. The same memory module last year would have cost as much as $120.

This research is produced by Gartner Dataquest's Semiconductors Industry Worldwide group. This research group combines memory, microcomponents, logic, ASIC, analog, discrete device, RF, optical and intellectual property segments into a complete industry picture. Products, suppliers, startups, technologies, regional consumption, applications and emerging technologies are all covered in this broad program. For more information about this service, please call 408-468-8000.

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