Plummeting dynamic random access memory (DRAM) prices have left manufacturers and distributors struggling to manage inventory, but the drop is proving a boon for systems integrators who are drawing a sigh of relief after more than 12 months of component shortages.
World prices for SDRAM seem to be decreasing daily with 64Mb SDRAM, which last year traded at $US9, trading at around $2.35 last week. An oversupply in the market has left vendors holding the inventory, and big name companies are falling by the wayside.
Times are tough in the PC market. A combination of increased production and falling PC sales has led to the supply glut. However, systems integrators looked set to be the real beneficiaries.
"It is a very good thing," ASI Solutions product manager Darren Miller said. "From the systems integration side, we see this as a light at the end of a very long tunnel. It has been a long time since we have had some relief in the supply of products."
While manufacturers have been the worst hit, distributors are also finding it difficult to juggle inventory with sales in an increasingly volatile market.
According to Andy Hilton, managing director of distributor Simms International, finding the equilibrium between volume and prices is a tricky business.
"Now that memory is cheap, people can upgrade very cost effectively and they will probably buy a higher capacity module as a result" he said. "The channel has to increase its volumes to compensate for the decline in prices. That can be achieved because at the cheaper prices people tend to buy more product, but it is a bit of a balancing act.
The falling price has had a minimal impact on the company, he said, although distributors and manufacturers with large inventories are suffering.
"Particularly if they stockpiled in the last quarter of the year in anticipation of the market growing," he said. "It is a classic supply-and-demand situation with memory - it is really a commodity in that respect."
The fallout from the price fluctuations is already affecting the market. Memory Card Technology, the parent company to Hypertec in Australia, reported to the Danish Stock Exchange the company had lost as much as 624 million Danish kroner ($US77 million) in the last seven months as prices plummeted.
Inform market analyst Chris Herbert said the price drop would also affect third-party dealers who are currently doing it tough in the sluggish PC market.
"While it looks like good news on the surface, the price drop couldn't have come at a worse time for the smaller third-party dealers, though it is probably good news for system builders who are not heavily reliant on third-party sales," he said.
ASI Solutions product manager Darren Miller.