Memory prices are once again starting to climb, but industry observers caution buyers not to rush out to stock up as they prepare for Windows NT upgrades because the uptick will likely be followed by the traditional price cuts later this year.
Even with demand continuing to grow and with chip makers cutting back on production, prices are not likely to continue rising after the fall consumer buying season, said Angelo Matthews, director of equity research at CIBC Oppenheimer.
"Even with bit growth at more than 70 per cent per year, capacity is still 20 per cent over demand," Matthews said.
The current price rise results from PC manufacturers, who have been reducing on-hand inventories over the past year, stocking up for the back-to-school season, Matthews said. At the same time, these OEMs (original equipment manufacturers) do not want to be caught short in October or November when consumers are buying for the holidays, so they are placing orders now.
DRAM (dynamic random access memory) manufacturers have also been cutting back on production to balance supply and demand.
The production cutbacks may turn into rising prices in the third quarter of this year, said Mario Morales, semiconductor program manager at IDC. Prices have been firming as PC makers replenish low inventories in anticipation of sales this fall, Morales agreed.
"We're seeing most PC vendors at manageable inventory levels," Morales said.
These manufacturers are beginning to stock up so they will not have to pay higher prices if their projected boom in PC sales materialises, Morales said.