Memory Prices Set to Hit the Bottom in the 2H '07

After tumbling for more than four consecutive months, prices on dynamic random access memory (DRAM) may sustain rapid decrease in the coming months, causing memory chip makers to continue losing money. Nevertheless, as the demand towards computers increases in the second half of the year, towards back-to-school season, the prices may start to rebound, according to DRAMeXchange.

Price of one 512Mb DDR2 PC2-5300 (667MHz) chip has decreased by 53% in the last twelve months from $5.21 to $2.37, which is not really negative for large DRAM manufacturers as they continually implement new manufacturing technologies and, considering that prices remained pretty high till mid-December, 2006, hardly anyone suffered from changing pricing in 2006. However, starting 2007 memory pricing has been tumbling rapidly and may soon hit the bottom.

The persisting price declines have pushed DRAM makers to the verge of losing money. Migrating to more advanced fabrication processors, and boosting shipments of 1Gb chips will be two key factors in deciding how the respective DRAM makers perform in the second half of the year, according to market tracker DRAMeXchange.

The current declines in the DRAM contract price have been much bigger than originally expected, the research firm claims. This has been mainly attributed to the weak seasonality in the PC market, and huge imbalance in the demand and supply chain. DRAM makers have been forced to sell their chips at particularly low prices, as their monthly capacities continue to enhance. However, with the inventory levels of PC makers now running lower and seasonally weak second quarter coming to its end, DRAM demand may start to pick up, which will result in memory pricing rebound.

Computer hardware developers tend to start shipping new hardware to PC manufacturers starting in mid-June so that the latter could prepare new systems for the back-to-school season. The increase in demand towards hardware in overall will indisputably cause memory price increase.

The ongoing price declines are dragging DRAM makers to the brink of losing money. In response, manufacturers are trying earnestly to further cut down costs, notes DRAMeXchange. For instance, Micron recently announced the successful development of the 1.5V DDR2 chip using the 78 nm manufacturing process. The smaller voltage is capable of saving approximately 24% of power. As Micron owns a larger ratio of the less cost-effective 200mm fabs, it is introducing chips with special specifications, in order to avoid the fierce price competition in the commodity DRAM market. For Samsung and Hynix, they have begun to run test trials using the 68nm and 66nm process, along with increasing the shipment ratio of 1Gb chips for 2H07. On the other hand, Taiwan manufacturers are continuing to boost the capacity of their 300” fabs. Needless to say, amid the rapid capacity increase, the cost down mechanisms being introduced by the DRAM manufacturers will play an instrumental role in their future competitiveness.