Memory Prices Expected to Rise

DRAM chip makers are forecasting higher prices for DDR2 (double data rate, second generation) memory chips over the next three months, and current trends could mean they'll remain strong all year.

It's a forecast that users who need memory for PCs and other devices should listen to, because a number of factors are sending DRAM prices higher even as the PC market enters its weakest season of the year, the second quarter.

U.S. DRAM maker Micron Technology kicked off earnings season for DRAM makers early last week by saying prices for the chips had rebounded after dipping in March.

"DRAM demand exceeded supply in the second half of the quarter," said Mike Sadler, a vice president at Micron, during the company's investor conference. He credited growing PC shipments, demand for more memory per PC, increased laptop sales, and the market shift to DDR2 from older generation DDR memory for price gains in DDR2.

DRAM demand will rise 50 percent to 60 percent this year compared to last year, he added.

Prices for the most widely used DDR2, 512 megabit chips that run at 533 MHz, have risen 7.4 percent since the end of last month to $4.92 on Tuesday, according to DRAMeXchange Technology, which operates an online clearinghouse for memory chips.

Samsung Electronics, the world's largest DRAM maker, added that it saw DDR2 prices strengthening in the second quarter during its first quarter investor conference late last week.

On Tuesday, Taiwan's Nanya Technology and Inotera Memories echoed the sentiment, predicting stable to higher prices in the April-June period, and into the third quarter.

"Although the second quarter is normally the weak season, it doesn't look bad right now," said Pai Pei-lin, a vice president at Nanya Technology.

"The DDR2 market will really take off after the latest microprocessors from [Advanced Micro Devices] hit the market," he added. AMD is expected to launch its first microprocessors made for use with DDR2 in June. Currently, Intel microprocessors work with DDR2.

What About Vista?

One wild card that companies mentioned as a possible downer for DRAM prices was Microsoft's delay in shipping Vista, which could affect PC shipments later this year. DRAM makers had expected Vista to cause PC makers to use more memory per box. But the delay in launching the OS could cause some users to put off buying new PCs, which would weaken DRAM prices.

But most companies say PCs shipping later this year will be Vista-compatible, made with components and memory content to allow them to be easily upgraded to the new OS. In addition, PC sales tend to pick up around August as parents buy new PCs for their kids ahead of the school year. Strong PC sales cause DRAM prices to rise, since most of the chips end up in desktops and laptops.

Inotera, a joint venture between Nanya Technology and Germany's Infineon Technologies also sees solid prices for DDR2 during the second quarter, and predicted the trend would boost its earnings.

"The second quarter will be better than the first quarter," said Charles Kau, president of Inotera, at the company's first quarter investors' conference on Tuesday. Inotera is mainly producing DDR2 chips that run at 533 MHz and 667 MHz, he said.