Could the devastation in the DRAM industry lead to a resurgence?

We have written here before on the problems in the semiconductor sector and especially among manufacturers of memory chips.

IC Insights has come out with a report that contends that the stage is set for strong growth in DRAM.

The way the industry is shrinking could actually be a positive. Several DRAM vendors, including Micron, are eliminating their 200mm wafer fab capacity. Qimonda and possibly other DRAM vendors are filing for bankruptcy. The Taiwanese government is consolidating and bailing out a group of their DRAM manufacturers.

What is the outcome of all this destruction and devastation? IC Insights thinks that DRAM supplies will tighten and more closely align with demand as the year progresses.

After a tough 1Q2009, the company expects demand will increase sharply (see chart below). IC Insights forecasts quarterly growth to $4.9 billion (17%), $5.9 billion (21%), and $6.8 billion (15%) to finish the year.



This sounds good but even if this positive scenario does play out as expected, DRAM sales for 2009 will still be 12% lower than in 2008. And keep in mind that 2008 finished on a low note.

IC Insights believes that the first quarter of 2009 will be the bottom for the DRAM industry. I can see how the reduction in worldwide production capacity can help stabilize chip prices but I find it difficult to accept that demand will increase sufficiently to make the numbers illustrated in the chart above. IC Insights points to strong increases in spot prices for some versions of 512Mb and 1Gb DRAM chips since the beginning of 2009 as reason to believe these sales numbers could actually come to pass.

With DRAM sales driven mostly by consumer electronics demand and general PC demand, though, it still seems that expectations for a rebound in the DRAM industry this soon is a stretch. On the other hand, IC Insights contention that the bottom is 1Q2009 may not be too far off the mark. So how do you feel about timing the bottom, even for just one sector?