DRAM price collapse not a sign of PC problems

DRAM price collapse not a sign of PC problems

DRAM prices are collapsing, but it's not because of any problem with PC demand, analysts say.

It's that time of year again when PC assemblers and other companies that require dynamic RAM (DRAM) assess whether they have got enough for the end-of-year holiday sales, and turn around and dump leftover DRAM back onto the market. By the look of falling prices in the DRAM market, they appear to have plenty -- but it's not a sign of any problems in the PC market, according to analysts.

It's a yearly trend that has again arrived, and DRAM prices should continue downward for the next few weeks since companies throughout the PC supply chain are under growing pressure to sell off excess inventory, an industry researcher, DRAMeXchange Technology, said.

The DRAM market behaviour is normal for this time of year because retailers have nearly finished stocking their shelves with PCs and laptops ahead of the holidays.

Sometimes weakness in the DRAM market foretold of slipping PC sales, but that was not the case this time around, the analysts said. PC sales wee still in line to meet high expectations set earlier this year.

"This is very normal behavior for the DRAM market, it has nothing to do with weakness in PCs," chip industry analyst at SinoPac Securities, James Huang, said. "The trouble is PC makers haven't been adding more memory per box."

The contract price PC makers such as Dell pay for DRAM tumbled nearly 6 per cent for chips to be delivered in the second half of November, while the spot market price of the most widely used DRAM, 256Mbit Double Data Rate (DDR) chips that run at 400MHz, has plunged nearly 14 per cent over the past month to $US2.17 per chip, according to DRAMeXchange.

For a number of reasons, including high DRAM prices and less DRAM added per PC this year than normal, the market doesn't reflect what's going on in PCs today. One point it did reflect is the high volume of PCs being sold to users in emerging markets, where PC assemblers tended to add as little DRAM as possible since cost was a high concern, analysts said.

Last month, market researcher IDC said third-quarter PC sales grew at a blistering 17.1 per cent due to strong sales of low-cost PCs and notebook computers.

While PC sales are expected to remain brisk through the end of the year, it's quite another story for DRAM.

Memory prices should remain on a downward path as demand continued to shrink significantly in December, and declined further during the first half of next year, DRAMeXchange said.

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