DRAM prices continue to surge in August

DDR3 computer memory chips rose 18.9 percent in August, Gartner said

DRAM prices continued to rise in August, finally reaching profitable levels for most chip makers after they reached multi-year lows early this year.

Contract prices of 1Gb DDR3 (double data rate, third generation) chips rose 18.9 percent in August to $US1.58 per chip, while the price of older DDR2 (second generation) chips increased 13.7 percent to $US1.45 during the month, market researcher Gartner said in its weekly Semiconductor DQ Monday Report.

The price increases come at the most important time of the year for PC manufacturers to build and send computers to global markets. For many countries, the back-to-school season is kicking in and many students return to school with new laptop PCs or parents buy desktops.

The rush to put goods on store shelves often causes price increases in the DRAM market, and sometimes prices don't stop moving higher until around the end of October, when stores want to have products ready for the end-of-year holiday season.

This year, the launch of Microsoft's Windows 7 operating system could cause higher demand as stores buy systems to have ready for the Oct. 22 launch date.

Dell, the world's second biggest computer vendor by shipments, also spurred talk of better PC sales later this year when it said last week it expected revenue in the second half of the year to be stronger than the first.

Intel added to the positive sentiment by increasing its revenue guidance for the third quarter. The chip maker said last Friday that its third quarter revenue will likely be between $US8.8 billion and $US9.2 billion, from between $US8.1 billion and $US8.9 billion, due to better-than-expected demand for processors and chipsets.

The company's microprocessors are in about 80 percent of the world's computers.

Investment banking firm Credit Suisse said 2010 could be even better for the company and the PC industry, potentially driving Intel earnings over that of its record high in the year 2000.

Bullish sentiment for the PC industry normally leads to rising DRAM prices.

Gartner noted that DDR3 prices have moved up so fast that PC vendors have turned to using DDR2 instead, which has sent DDR2 prices higher.

On Monday, smaller capacity chips were on the rise. The price of 512Mb DDR2 was up 4.2 percent to $US0.75 per chip in afternoon trading, according to DRAMeXchange Technology, which runs an online clearinghouse for the chips.

The price of 1Gb DDR2 was up just 2.4 percent at the same time, to $US1.60.

Users looking to increase the amount of DRAM in an existing PC should buy soon or wait until later this year or early next year, when PC production slows down and prices fall. The DRAM industry has been going through a rough consolidation due to the global recession, with one company, Qimonda, already out of business.

Other companies shut down production lines as part of a strategy to cut costs and stay in business, but with DRAM prices on the rise, they could turn those lines back on and flood the market again with cheap DRAM.

The price of DDR2 chips has increased 116.9 percent since the beginning of this year, according to Credit Suisse.

The price of the chips has risen 45.3 percent in the third quarter, compared to a 25.8 percent increase for DDR3 memory chips.

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Dan Nystedt

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