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DRAMeXchange expects NAND Flash CAPEX will decrease 58.9% in 2009

20 February 2009 Semiconductors

Taipei, February 17th ,2009----NAND Flash makers became more rational and focused on improving profitability. DRAMeXchange expects that the 2009 annual NAND Flash CAPEX will decrease 58.9%, larger than the decrease of 27.7% in 2008. This is helpful to the slowing down of 2009 annual NAND Flash bit output.

DRAMeXchange believes that the 2009 market supply bit growth will decrease from 132.8% YoY of the year 2008, to 63.5%YoY in 2009. If the hot season demand of 2H09 recovers and the makers can control their output growth well, the oversupply situation is hopefully to be improved in 2H09, and the NAND Flash price will become stable and gradually rise.

NAND Flash vendors currently had announced that they will keep phasing out part of their 200 mm NAND Flash fab equipments in 2009. Including, slowing down the capacity expansion speed in 300 mm fabs to decelerate the market supply bit growth as responding the market demand growth shrink and narrow the oversupply gap in 2009.

Recently, downstream customers are lowering their inventory levels and the demand mostly comes in the form of short term rush orders. With some inventory purchase demand after the Chinese Lunar New Year and the pushing by some rush orders, some NAND Flash contract prices are expected to become stable or keep rebounding in the short.

Since the current market visibility is low and the total NAND Flash market demand is still weak, under the circumstances of decreasing demand and supply, the 1H09 market will still be in the oversupply scenario, says DRAMeXchange.

The 2009 NAND Flash related end application shipments will decrease from 2008, but the huge range of the past price drop and the 
 process technology migrations have kept driving down the cost and give incentives to the increasing of NAND Flash capacity per system on the end applications. This will be the major driving force of the 2009 bit demand. DRAMeXchange expects the demand bit growth of the 2009 NAND Flash market will drop from 118.7% YoY of 2008 to 75.5% YoY in 2009.

In the past three year, the NAND Flash industry supply bit growth was higher than the demand bit growth. Furthermore, with the accidental variable of unexpected global financial storm took place in 3Q07. The NAND Flash market was under oversupply situation, and the annual ASP drop in the past three years were all close to or above 60% YoY. Therefore, the operating margin kept worsening. In 4Q08, all the NAND Flash makers were suffering from loss.

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