Worldwide DRAM supply is expected to exceed demand by 28% in 2011, compared to a supply glut of about 10% estimated for 2010, according to Digitimes Research. The industry will be dogged by oversupply as chipmakers ramp up output through conversions to new technology nodes.

About 3.23 billion 1Gb-density-equivalent DRAM chips will be produced in 2011, while demand grows at a slower pace during the year to 2.32 billion 1Gb-equivalent units, Digitimes Research predicted. Demand bit growth will reach 27.2%, coming below the supply bit growth of 58.8%.

Demand will grow modestly driven by growing demand for consumer electronics products such as smartphones, LCD TVs, set-top boxes and tablet PCs, Digitimes Research indicated. The consumer electronics sector is forecast to demand more than 500 million 1Gb-equivalent DRAM chips in 2011, up 67.4% from almost 300 million units in 2010, Digitimes Research said.

However on the supply side, major chip producers will scale up their output in 2011 as they migrate to 40nm- and 30nm-class processes for cost reductions and profit improvement. This is spurring a glut in supply, Digitimes Research observed.

The excess supply will also have a significant negative impact on DRAM prices, Digitimes Research said. The average price of 1Gb DDR3 may be dragged down to US$1.32 in 2011 from US$2.42 in 2010, and is likely to fall further to only US$0.48 in 2012, Digitimes Research estimated. The profitless business could prompt players with less-competitive process technology, such as Powerchip Technology and ProMOS Technologies, to put more emphasis on foundry manufacturing.