Optimism for DRAM Rises Despite Tablet Threat
The price of DRAM, the main memory chips inside personal computers, may tick up in coming months as stronger demand for laptop and desktop computers with new microprocessors from Intel and Advanced Micro Devices (AMD) drives stronger PC buying, analysts and market researchers say.
Prices of the chips, which are important to the overall speed of a computer, started falling last year as shaky consumer confidence hit sales of PCs, the main end product for DRAM. But rising optimism in the U.S. and new processor families, such as Intel's Sandy Bridge and AMD's Fusion, have stirred hopes that the bottom is near.
The rub for end users is that higher DRAM prices are usually passed on to consumers in two ways, first via less DRAM in each PC, and second through higher PC prices. PC vendors normally react to higher DRAM prices by reducing the amount of DRAM they put into computers and then by passing on higher costs.
The price of high-end 2GB DDR3 (double data rate, third generation) DRAM modules declined to US$16.50 for the second half of January, down 65 percent from a peak of $46.50 in the first half of last year, according to DRAMeXchange, which runs an online clearinghouse for the chips.
That price may mark a bottom due to several factors, including the new Intel and AMD chips, increased PC purchases as gifts in the Chinese New Year holiday, Feb. 3, and inventory rebuilding among PC vendors at the end of the first quarter. DRAMeXchange also believes more companies will turn to using 64-bit operating systems this year, which require much more DRAM than traditional 32-bit operating systems.
The company predicts DRAM prices will rise by as much as 25 percent from now through May.
A growing chorus of other optimists also see better times ahead for DRAM makers.
In a report last week, analyst Uche Orji at investment bank UBS said DRAM price cuts last year have led PC vendors to install more DRAM in every PC they ship, while delays in new factory building will slow growth in chip output. The two factors will help steady the DRAM market this year.
Market researcher IC Insights also predicts a solid year for the DRAM industry this year but cites one glaring caveat: The researcher believes the growing popularity of tablet devices is bad for the DRAM market.
Tablets have eroded the market for low-end laptop PCs, according to IC Insights analyst Brian Matas. This spells trouble for DRAM makers because tablets typically sell far less DRAM inside than notebooks. Matas estimated that tablets sold in the fourth quarter shipped with 512MB of DRAM inside, compared to 2GB in a notebook.
Despite the impact of tablets on the DRAM market, IC Insights is generally positive on DRAM revenue this year, forecasting a 2 percent increase in DRAM revenue this year and maybe more.
"Overall, I think it will be a good year for the DRAM market," Matas said. "We believe this will be the second of a three year growth spurt for DRAMs (2010-2012) with more upside potential to our 2 percent forecast."
To be sure, the number of DRAM market pessimists still outweighs optimists. IHS iSuppli, for example, recently forecast an 11.8 percent decline in DRAM revenue this year to US$35.5 billion due to oversupply and sluggish PC demand.
But the number of people changing their view of the direction of the DRAM market is growing, and it may be time to pick up DRAM on the cheap if needed.
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