Despite the best efforts of DRAM manufacturers, the price of memory continues to fall. Over the last few months rumours have circulated that the pricing freefall had ceased ahead of an expected increase, but this has failed to eventuate.
Colin Brown, memory consultant at distributor MCM, said he saw no end to the steady decrease in prices. "The commodity market has dropped another 20 per cent in the last two months, and with it, both wholesalers, and resellers, margins," he explained.
Users of memory-hungry systems, such as Windows NT, are cheering the continued slide in prices. One reason for the price drops may be that future increases in production capacity announced by DRAM suppliers have convinced buyers that there will be excess production.
Reductions in DRAM production, and even the exit from the market of some suppliers, have not stopped the slide. On top of cutbacks last year, major DRAM suppliers such as Hyundai, LG Semicon, and Samsung will shut down production lines soon, 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 16Mbit chips by the middle of this month," said 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."
Will a shutdown help?
Dataquest analyst Jim Handy points out that a proposed five-day shutdown, even among the Korean suppliers that account for one-third of DRAM production, would result in only a small reduction of the number of chips flooding the market.
Brown's advice to resellers is "Just buy what you need, and don't keep it on the shelf. But then, resellers know that better than I do already."