DRAM Prices Are Making Comeback
Industry Breathing Sigh Of Relief As Prices Begin To Stabilize Once Again
By Amber Howle
Irvine, Calif.
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The DRAM industry finally may have seen its darkest days. According to some analysts and executives, DRAM vendors have reason for hope after two and a half years of declining prices.
Recent factors such as the Asian flu, major vendors' slowing down production and PC OEMs' stocking up on components to avoid being caught short in the face of fourth-quarter demand have helped firm up DRAM prices in the last two months. The average prices of 16-Mbit DRAM, for example, have edged up between 50 cents and $1, according to chip makers and market analysts.
Cuts in production of 16-Mbit and 64-Mbit DRAM have helped correct prices in the last month, said Mike Zaldivar, director of procurement at Viking Components Inc., based in Rancho Santa Margarita, Calif.
It is hard to determine whether Asian companies can afford to gear up for the next increase in demand, said Bill McClean, president of IC Insights, a Scottsdale, Ariz.-based semiconductor market-research firm. Some of them, he said, may be forced to drop out of the market, which would cause a shortage and drive some prices up further.
If the Asian flu causes a shortage in the semiconductor industry, it will be concentrated in the memory market because "that's where Asian companies have the biggest presence," said McClean, adding that such a shortage would not be felt for a few years.
The threat of enforcement of antidumping laws may be keeping some of Asia's high-volume manufacturers in check, said Steve Cullen, senior DRAM analyst at Cahners In-Stat Group, Scottsdale, Ariz.
The U.S. Commerce Department has scrutinized over several years allegations of DRAM and SRAM dumping by companies based in South Korea and Taiwan. In some of those cases, the U.S. International Trade Commission has assessed penalty tariffs.
The European Electronic Components Association has asked the European Union to investigate allegations that companies based in South Korean, Japan and Taiwan have dumped DRAM products in Europe. "Although it's moving at bureaucratic speed, the mere filing of it is enough to attract some attention," Cullen said.
Samsung Electronics Co. Ltd. and Hyundai Electronics Industries Co. Ltd. recently announced production slowdowns.
Meanwhile, three Texas Instruments Inc. fabs acquired by Micron Technology Inc. may be partly or entirely shut down while they are re-equipped, a Micron spokeswoman said. Such closings could put a small dent in global monthly DRAM output.
The DRAM plunge has been attributed to a glut that beset the industry when overly optimistic manufacturers responded to the emergence of memory-hungry PCs running new Windows applications.
The best bet for VARs during the price free fall had been to wait until the last minute to buy DRAM, then hope prices did not drop further. When VARs were lucky, prices would go up a little.
"It's good for the VAR who manages inventory properly," Cullen said. "Otherwise it's like having a refrigerator full of fish when the power goes off."
Although profit margins might have dropped for the DRAM makers themselves, it was unclear how VARs were affected because the value-added percentage they provide tended to be more stable than DRAM prices, he said.
"When DRAM prices are low, VARs may certainly have better margins," Cullen said.
The shift from 66MHz to 100MHz memory bus has resulted in a minor shortage of PC-100 SDRAM, said Mike Keskinen, director of purchasing at Advantage Memory Corp., Irvine, Calif. "We try to keep a lot of the PC-100-type product in stock. . . while a lot of our competitors will outsource that part."
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