The SIA reported this week the following memory chip sales results for October:

Sales of both DRAMs and NAND flash declined significantly year-on-year due to pricing pressure. DRAM sales in October were 14 percent lower than one year ago while NAND flash sales were off by nearly 41 percent - over the same time period DRAM 1 Gigabit equivalent units increased 73 percent while sales of 2 Gigabit equivalent NAND units grew 123 percent.

Translating those sales and GB shipment numbers into their respective average selling price (ASP) declines, we calculate that composite DRAM mix suffered a 50% price down over the past twelve months. Similarly, NAND flash prices per GB for the overall NAND mix declined 73.5% over the past year. For some particulars, the leading DRAM...the DDR2 1Gb 128Mx8, 667MHz...dropped from $1.96 to $0.72 from 1 Dec 2007 to 1 Dec 2008 (-63%); the most popular NAND Flash, the 2Gx8 MLC, dropped from $8.89 to $1.67 (-81%) over the same time frame. As usual, the high volume runner took the biggest hit, and you can be sure that those whose product set focused outside the Maximum Danger Zone (such as in LP DRAMs, legacy SDR & DDR1 DRAMs, older NAND Flash, G DRAMs, and SLC NAND) suffered less precipitous overall price declines.

Even in December 2007, the $1.96 price for 1Gb DRAM was estimated to be about 20% under breakeven price for the 1Gb DRAM, thought to be somewhere in the $2.30-2.45 range; vendors were losing money then, and more later as the prices continued downward.

The fact that most memory makers are still standing (albeit, some rather weakly) is testimony to their survival skills and their having made huge strides in bringing down the costs of production for DRAMs over the past 12 months. Probably no die in production in the mainstream parts of the DRAM or NAND product portfolio was in production a year ago; most have been displaced, at least once, by new, smaller cell architectures and use process design rules that are 25-35% smaller than earlier versions. Faster speed distributions come for free for the DRAMs, such as higher yield to -800, which itself is moving into the mainstream in PCs, in advance of volume usage of DDR3, expected to ramp in earnest by the middle of 2009.

Memory chip makers will lose about $5 to $6B in the current 4Q08, on sales of $9-10B, and it will get worse as we head into 2009, at least for a few quarters. After that, no one knows.