Expect memory prices to continue their slide

Need more more memory? Of course you do. The news is still good, with DRAM chip and module prices still sliding. And despite the best efforts of DRAM suppliers to stop the trend, memory prices will continue to fall. Enterprises, especially those adding DRAM to upgrade to memory-hungry Windows NT, are cheering.

Need more more memory? Of course you do.

The news is good, with DRAM chip and module prices still sliding. And despite the best efforts of DRAM suppliers to stop the trend, memory prices will continue to fall. Enterprises, especially those adding DRAM to upgrade to memory-hungry Windows NT, are cheering.

"I'm very happy with the continued drop in DRAM prices," says Mark Perl, business manager at Visa USA, in San Francisco. "It becomes even more important as you upgrade to Windows NT."

Although price drops have not been as precipitous recently as they were last year, industry analysts believe the downward trend will continue. One reason may be that future increases in production capacity announced by DRAM suppliers have made buyers skeptical that prices will stabilise.

Cutbacks in DRAM production, and even exits from the market of some suppliers, have not stopped the slide. Following cutbacks last year, major DRAM suppliers such as Hyundai, LG Semicon, and Samsung this summer will shut down lines as they try to bring supply closer to demand.

At the same time, Motorola has announced that it will phase out DRAM production to concentrate on the more-profitable static RAM.

"The DRAM market has not been affected by a recent announcement that Motorola will terminate its production of 16 meg by the middle of this month," says Kristen McNeal, commodity trader at American IC Exchange. "The company has only a slight market share and its absence should have minimal impact on pricing."

Brief production shutdowns should also have a minimal impact, says Jim Handy, an analyst at Dataquest. Although he says that "this is a move in the right direction," Handy points out that the proposed five-day shutdown, even among the Korean suppliers that account for one-third of DRAM production, means that only a small percentage of the number of chips that are flooding the market will not enter the stream.

As a result, DRAM device prices will continue to decline at the 28%-per-year rate they have followed for decades, Handy said.

Moreover, the price shift in memory modules, the form in which most enterprises buy memory, has not been as dramatic as the drop in DRAM part prices, says George Iwanyc, also at Dataquest. Gyrations in DRAM part prices tend to be dampened by the time the devices are assembled onto printed circuit boards, he notes.

Because prices will continue to decline, Iwanyc recommends that buyers avoid large orders. Purchasing a few modules every few weeks should keep the total cost down, he says.

"I would just buy what I need," Iwanyc says.

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