Signs Show DRAM Price Surge

After steadily falling for almost a year and a half, the price of DRAM chips has surged in the last week and consumers could feel the effects as early as this week in higher retail prices.

A week ago, a stick of 256MB SDRAM traded for around $15 among brokers in Asia. That same stick of memory was trading for $30 in Asia on Wednesday, according to market-data supplier ICIS-LOR. The price of faster DDR memory has also risen, although not by as much, with a 256MB module trading for $34 on Wednesday, up from $24 a week earlier, according to ICIS-LOR.

For consumers, all of this means memory upgrades are about to get more expensive.

"The cost [of memory] has doubled since Thursday," said Mark Tosti, director of sales at Micro Memory Bank, a memory supplier based in Montgomery, Pennsylvania. "As soon as resellers run through their current inventories, they will have to raise prices. That could begin happening as soon as today."

Patience Urged

Users might be best advised to wait a while if they are planning a memory upgrade. Some analysts believe the increase in DRAM prices may be little more than a fluke.

"We believe the recent uptick in DRAM spot pricing is unlikely to be an indicator of improving industry fundamentals," wrote Eric Ross, research principal at Thomas Weisel Partners, in a research note published on Wednesday. Ross noted that 128MB DDR SDRAM spot pricing has risen 34 percent since November 6.

The surge in prices has been caused by several factors, Ross said. The $776 million rescue package for financially troubled Korean memory maker Hynix Semiconductor, rumors in Asia that Micron Technology may be holding back inventory to improve its negotiating position with customers, and speculative buying, driven by fears of further price increases, have helped drive spot prices higher, according to Ross.

Despite the current spike in prices, DRAM prices should fall during the first half of 2002, driven lower by weaker seasonal demand, Ross wrote.

Stay Tuned

But in the volatile computer memory market, nothing is ever certain.

"Nobody knows what is going to happen," said Kim Myung Ho, senior manager for technical marketing at Samsung Electronics, the world's largest computer memory chip manufacturer. "The price of DRAM is around the bottom. Windows XP is getting a positive impression from users and XP needs 256MB [of memory] and [sales of] the Pentium 4 will be booming because Intel has reduced the price."

These two latter factors are expected to drive demand for SDRAM. At his Comdex keynote on Sunday night, Bill Gates, chair and chief software architect of Microsoft, said his company has already sold 7 million licenses for Windows XP. In addition, Intel plans to release next month its new 845-D chip set, which allows the Pentium 4 processor to be used with DDR SDRAM. Right now the chip can only be used with more expensive Rambus DRAM.

With its price already high, Rambus DRAM has seen only a slight increase in the last week, according to ICIS-LOR. A 256MB module cost $79 a week ago and traded for $83 on Wednesday, the company said. Samsung's Kim expects the Rambus price to fall over the next year although continue to sell at a premium. Within the next 12 months, he predicts Rambus memory will fall to around one and a half or two times that of SDRAM.