DRAM rollercoaster takes a dive

DRAM rollercoaster takes a dive

Resellers and systems integrators are tightening their grips as the DRAM market takes another harrowing dive. In the wake of the failed Hynix-Micron merger and as manufacturers continue in their struggle to find the optimal balance between supply and demand, the price of DRAM has come crashing down from the highs it experienced in March.

At the start of April, the price of 16Mx8 PC 133 SDRAM was around $3.50, the 16Mx16's price was $10-$11 and the 4Mx16 was prices at roughly $2.40, according to business-to-business global trading exchange Converge. Last week, however, pricing had dropped to below $3 for 16x8, to less than $8.50 for 16x16 and under $2 for 4x16. Other configurations in these densities are priced even lower; the 32Mx8 PC133 SDRAM, for example, is trading at $7.75 or below, Converge said.

Original modules have also come crashing down. On April 1, 256MB PC133 S-DIMMS were trading at $74 and 128MB PC133 S-DIMMS at $42. Last week, though, they could be had for $54 and $27, respectively -- and there's still room for them to fall further.

According to Keith Hamilton, internal sales country manager of Kingston Technology, an oversupply of DRAM memory and lower-than-expected PC sales over April, combined with the failure of the Hynix-Micron merger, were major contributors to the drop in DRAM prices.

"Prices tightened during the speculation over whether Micron was going to buy Hynix. It was speculated that Micron was going to close down some of the combined entity's DRAM plants, which could have resulted in a slowdown in DRAM capacity and production and an increase in DRAM prices," he said.

It is in the best interests of manufacturers to not oversupply DRAM, thereby avoiding enormous fluctuations in DRAM prices. Given that Micron and Hynix are the second and third largest semiconductor manufacturers in the world, respectively, if Micron had taken over Hynix, it would have had a lot more control of the market as well as the supply of DRAM, Hamilton explained. Hence, the market speculated that if the merger went through, the price of DRAM would stabilise and gradually increase, so customers bought up big.

Since the buyout failed to eventuate, and with the lower-than-expected PC sales also contributing to an oversupply of DRAM, the price has dropped, and looks set to continue on its downward spiral as the market enters its traditionally slow second quarter.

According to Hamilton, resellers and systems integrators should be buying their memory and PCs on a "just-in-time" basis. They should also be leaving their inventory management to the experts, he said. Asked what effects the recent drop in DRAM prices will have on resellers, Hamilton said: "If they've got lots of inventory, it's gotta hurt. They have to bleed that inventory as soon as possible.

"Resellers should stay away from inventory management, because there's a lot of price erosion involved. What they need to do is establish a good business relationship with their distributor channel, and then find out what the supply situation is."

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