DRAM prices triple within two months

Anyone considering adding extra memory to a personal computer to facilitate the upgrade to Windows XP will be wishing they'd done so earlier. Computer memory prices have been rising steadily since November and have registered large jumps in the first few trading days of this year -- jumps that are quickly being reflected in retail prices.

"Prices have been going up ever since before Christmas (Dec. 25)," said Clive Ong, an analyst at memory market watchers ICIS-LOR in Singapore. Ong said a combination of factors are behind the rise, which has become steeper since the beginning of 2002.

Consider a 256M-byte stick of SDRAM (synchronous dynamic RAM), the most common type of PC memory. At the beginning of November these were changing hands for around US$17 on Asia's memory spot market, according to ICIS-LOR. This had almost doubled to $30 by the end of 2001 and now sits around $54 -- a tripling of the price in just over two months.

The price of faster and higher specification DDR (double data rate) SDRAM has also registered similar gains, jumping from $24 at the beginning of November to $70 this week, said ICIS-LOR.

In Tokyo's Akihabara electronics district, the price of computer memory has been rising since the beginning of December in step with the spot market price. This las lead to higher prices for consumers and some stores have posted notices explaining the rapid rise.

One of the factors driving up prices, said Ong, is an anticipated merger or joint venture between Micron Technology Inc., the second-largest manufacturer of DRAM chips, and South Korea's Hynix Semiconductor Inc., which is also a major manufacturer. Executives from both companies have been talking for some time and a deal is due to be signed shortly, according to numerous Korean press reports. "Many traders think this is a positive move, both for the market and prices," said Ong.

The analyst also cited market acceptance of earlier price rises by manufacturers.

"Main players like Samsung (Electronics Co. Ltd.) and Micron put up spot prices in recent months," he said. A price war that has been raging for most of 2001, and that was behind the very low prices enjoyed by consumers until November, ended up hurting all the companies, said Ong, "so they thought they might as well increase prices. When they saw the spot market accepted this, Hynix and Samsung announced they are moving their contract prices up by 30 percent."

The contract prices are those quoted to major customers -- such as personal computer makers -- who buy large amounts of memory, often placing orders months in advance of delivery. A rise in contract prices now will translate into higher costs for PC makers and could work its way through to higher consumer prices.

Not all memory prices are rising however.

The price of Rambus DRAM, a proprietary memory used mainly with Intel Corp.'s Pentium 4 chips, has been falling. The price gap between Rambus DRAM and DDR memory has shrunk to around $5 on the spot market -- a far cry from the $60 difference at the beginning of November.

While a closing of the gap between DDR and Rambus might help the latter format pick up supporters, this isn't likely to happen quickly, said Ong. The gap in contract prices is greater than that in the spot market and capacity is still limited, he said. "Many manufacturers are producing DDR and it is easier to make than Rambus (DRAM). The production technology is very close to SDRAM and you don't need to completely overhaul your plant to produce it."

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