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Companies Feel the Effects of Falling DRAM Prices

Oversupply of memory presents boon for users but tough times for manufacturers.

By Rob Guth, PCWorld   

Hitachi will end production at its Irving, Texas, plant and merge the operations of Hitachi Semiconductor (America) in Brisbane, California, and Hitachi Micro Systems in San Jose, California, a spokesperson at parent company said here Wednesday.

Mitsubishi, meanwhile, will shut its test and assembly facility in Durham, North Carolina, and consolidate its engineering and design operations under one subsidiary, a spokesperson at Mitsubishi said.

Hitachi will lay off 650 employees, while Mitsubishi will trim staff by 230, the companies said.

The restructurings represent the most recent bumps in a long, troubled road for memory chip makers. NEC's semiconductor group in August said it would slash capital investment by $214 million and delay construction of a new production line by one year.

The cutbacks are the result of an oversupply of DRAM chips, which has dropped the price of memory to record low levels. Not only are memory add-in cards cheaper than ever, but PCs are shipping with increasingly more DRAM onboard. Some PCs priced below $1000 today come loaded with 64MB of DRAM, a level that was unthinkable just a year ago.

"The falling prices of standard DRAMs will continue for quite some time," a spokesperson at Mitsubishi said. "We are also seeing a massive oversupply ... in order to weather this, you have to cut costs wherever you can."

Though the continuing fall of DRAM prices has been a boon for users and PC makers, the moves this week by Hitachi and Mitsubishi further what is fast becoming a mass exodus from the production of plain-vanilla DRAM chips.

"In the short term, it's great for users, but if DRAM prices stay at this level, then no one is going to put the effort into developing these types of technologies," said a spokesperson at NEC.

And no respite is in sight. Earlier this year, Dataquest predicted that the oversupply of DRAM will last into 2001.