Expansion is only one of the problems, semi production mix issues are the major problems

Implications: 1. DRAM/NAND chipmakers do not have a formula to determine how many components they should be producing at any given time, thus the market is often in shortage/oversupply situations due to production mix issues. 2. Continued expansion in the sector (more fabs, more lines, etc) will continue to negatively impact ASP (Average Selling Price) and cause further market saturation.

Analysis: Demand typically does not eclipse supply in the DRAM/NAND sector unless there are mix issues occurring at the semiconductor mfgr's...which happen on a regular basis. These companies (e.g. Micron, Hynix, Elpida) can never figure out the exact, perfect mixture of NAND, DDR1 and DDR2 components that they should be manufacturing due to the unsteady demand in the marketplace. This is not fully their fault due to the difficulty in predicting the behavior of consumers. Thus, we are too often put into oversupply situations on one product, and left with a shortage on another. The semis can switch their lines to produce DRAM or NAND chips, but the art of it is deciding when to switch up the lines and for how long. For example, the current glut of DDR2 components in the market is a direct of result of overexpansion of capacity and the continuing inability to control production.

Every corporation wants to expand, and semiconductor co's are no different. Unfortunately, since we are in a commodity market, when these companies expand it not only produces more choice for the consumer but it also negatively impacts the market by further increasing an oversupply situation. The expansion problem has no solution in sight.