Computer memory chip prices are still in freefall, which is great news for users but bad news for the bottom line - makers of the devices.
The spot market price for benchmark 64M-bit PC100 synchronous dynamic random access memory (SDRAM) chips has fallen around 15 per cent in the last two weeks, according to information from semiconductor market data provider Independent Commodity Information Services - London Oil Reports (ICIS-LOR), a unit of Reed Elsevier.
In the Asian spot market, 64M-bit SDRAM chips are now trading in a $US0.50 range around $2.75 per chip which, according to industry sources, is around the cost of manufacturing. The same chips are trading at slightly higher levels in Europe and North America, according to ICIS-LOR, but are still at levels in which profits are razor thin.
The price slide began in July, after 64M-bit SDRAM devices hit a recent high of around $9 each, and just as major DRAM makers were forecasting shortages of the chips towards the end of the year. In part, those forecasts have ended up making the market weaker, said Jim Sogas, vice president sales and marketing for Elpida Memory, the recently formed computer memory joint venture between Japan's NEC and Hitachi.
"We had this continuous threat for the past six months that [supply] is going to be tight for a long time. It was definitely tight for the second and third quarters, but I think we projected that so much that some customers started hoarding parts and when they realised they didn't need to, they started burning them off," he said.
In addition to the inventory some PC makers built up, the lacklustre PC sector is also leading to a reduction in demand for memory chips, said Eric Ross, San Francisco-based vice president of semiconductor research at Thomas Weisel Partners. PC vendors have usually placed large DRAM orders for PCs to be sold during the Christmas period, although this year companies are being more cautious in the face of a possible market slowdown. Sogas believes an end to the slide might not come for at least three months so manufacturers might have to endure slimmer and slimmer margins.