Gartner: Flash saved DRAM from collapse in 2005

DRAM makers such as market leader Samsung Electronics Co. Ltd and Hynix Semiconductor Inc. would have faced falling prices amid massive overproduction had it not been for the popularity of NAND flash memory. DRAM production lines require minimal fine tuning to switch to NAND flash from DRAM and back, giving DRAM makers a choice of which product to make.

The popularity of digital music, photos and other data on consumer electronic devices created the need for NAND flash, which boasts massive data storage capacity, a low price and use in a range of gadgets. And the popularity of NAND flash was what kept companies from over producing DRAM last year, according to Gartner.

"It's very clear, NAND flash saved the DRAM industry from a major collapse," said Andrew Norwood, research vice president at Gartner, in a statement. "2005 was not a good year for the DRAM industry, but it could have been a lot worse," he added.

The DRAM industry normally runs in a boom bust cycle because cutthroat competition among makers causes them to invest heavily in new factories in order to gain market share. The investment often overshoots what's needed and causes a glut. Over the past several years, the industry has faced more gluts than good times, which reduces prices for users in the short term but could damage the industry over the long term.

Last year, DRAM skimmed by with a slight year-on-year decline in overall market revenue. Worldwide DRAM revenue declined 5 percent to US$25 billion last year, from $26.3 billion in 2004, according to preliminary estimates from Gartner. It was the first contraction of DRAM industry revenue since 2001, when revenue declined a massive 63.2 percent.

South Korea still dominates the DRAM sector thanks to Samsung and Hynix. Despite their focus on NAND flash last year, the two companies still sold nearly half of all DRAM chips that went to market last year, Gartner said.

Samsung took first place in the DRAM industry with a 32.1 percent share of the market, followed by Hynix at 16.4 percent, Gartner said. U.S. chip maker Micron Technology Inc. grabbed third place with a 15.5 percent share of the market, while Germany's Infineon Technologies AG hit 12.7 percent and Japan's Elpida Memory Inc. was fifth with 7.1 percent.

Taiwanese companies rounded out most of the remaining top ten, with Nanya Technology Corp. number six and the top performer in terms of year on year growth. Nanya took a 5.8 percent global market share last year as its sales increased 21.4 percent over the previous year.