After meteoric rises in memory prices over the last few months, prices have fallen back to more realistic levels, though the situation is far from stable.
Norse Technology is currently selling 64 megabit chips for $10.50, down from highs of $20, which, according to Colin MacFarlane, director of Norse, is a response to the Taiwanese earthquake in August.
`It appears there is still a shortage of supply but there isn't any demand either. Third-party vendors are just not building any systems because of shortages and price hikes in other components such as motherboards,' explained MacFarlane.
Keith Hamilton, marketing manager for memory manufacturer Kingston Technology, is predicting the market will remain volatile and prices unstable.
He said Hitachi was forced to shut down its manufacturing plant in Japan after the nuclear accident there in September, exacerbating worldwide componentry shortages caused by an estimated two weeks of down time in Taiwan.
And the timing could not have been worse, according to Hamilton, who believes the traditional Christmas spree will rock the fragile balance between supply and demand even further.
Although Y2K issues and the delay in Windows 2000 will postpone orders for memory from other sectors, DRAM manufacturers will continue to ramp up chip production as demand still outstrips supply. `It is the fact that the spot market didn't panic rather than an increase in supply that has pushed the price of memory down,' MacFarlane said.
MacFarlane is expecting prices to go down further, to about $10, despite the attempts of memory manufacturers to engineer prices at $11. `Chip manufacturers wanted to achieve an $11 level and stopped manufacturing at optimum capacity when prices were around $6. They are unlikely to supply chips if the price goes down much further.'
Yet prices are expected to increase again if demand increases, which is likely to occur as componentry supply out of Taiwan becomes more reliable.
A second earthquake in Taiwan, measuring 6.4 on the Richter scale and with its epicentre in Chiayi, 300 kilometres south of Taipei, has apparently not harmed the country's chip manufacturers further, Hamilton said.