Forecasters See Some Stability After Long Plunge -- DRAM Bottoms Out, Edges Up
Amber Howle
Irvine, Calif. -- After a two-and-a-half-year downward spiral, DRAM prices are bouncing back.
Average selling prices actually have risen over the last few months and are expected to stabilize next year, making forecasts easier for resellers that build systems and provide upgrades.
"Prices will go up a little by the end of the year, then stabilize, then drop down a little more," said Steve Cullen, senior DRAM analyst at Cahners In-Stat Group, Scottsdale, Ariz. "The price declines will be much more gradual."
By the year 2001, he added, there could be a mild shortage and perhaps the beginning of a tight market.
Reasons for the comeback in DRAM prices include slower production and a phasing out of older technologies as demand remains stable.
Major Asian suppliers, including Samsung Electronics' Semiconductor Business, Kiheung, South Korea, and Hyundai Electronics Industries Co. Ltd., Ichon, South Korea, slowed production earlier this year, creating a tighter supply and a less competitive market.
Because of timely and complex manufacturing processes, market reactions in the memory industry take about two years, said Jim Handy, memory analyst at Dataquest, San Jose, Calif. "[The memory industry] now is in a low capital spending cycle," he said. "There will continue to be low capital spending next year."
By 2001, there will be an outright product shortage, causing prices to rise again, Handy said.
In the near term, the price of older memory products is expected to decline, said Sherry Garber, DRAM analyst at Semico Research Corp., Phoenix. For example, the price of EDO DRAM products is expected to go up because vendors are phasing out the designs, she said. "Some of the older components' prices will probably creep up a little through next year, and that's just supply and demand," she said.
Demand for new designs such as Direct RDRAM and Double Data Rate (DDR) SDRAM, which are due to hit the channel by the second half of next year, may overtake supply, making them more expensive, Garber said.
Resellers are likely to stick with the current generation of SDRAM, which is expected to dominate through next year. SDRAM prices will decline gradually.
Meanwhile, the price of 16-Mbyte modules should continue to rise as they are phased out in favor of 64-Mbyte and 128-Mbyte products, some memory vendors said.
"Higher-density requirements for next year will be 128 Mbytes, which will be at price parity with 64 Mbytes," said Avo Kanadjian, vice president of memory marketing at Samsung Semiconductor Inc., San Jose, Calif., adding that "16-Mbyte modules will probably go up in price."
Al Soni, vice president and general manager of services at Kingston Technology Co., Fountain Valley, Calif., agreed, saying most vendors are limiting memory supply and phasing out 16-Mbyte products, helping to bring a little balance to the DRAM market, Soni said. "It's still not there, but it's getting there," he said.
Strong demand will result in prices edging up, said Jim Sogas, director of DRAM product marketing at Hitachi Semiconductor (America) Inc., San Jose, Calif.
"This quarter growth has been stronger than we expected," Sogas said. "We don't anticipate any reason for it not to continue growing."
Next year will be a transition time for the memory industry as it embarks on new technologies while compensating for this year's slowdown in production, Sogas said.
For VARs, "it means that they're not going to pay more for DRAM next year than they did this year, but they're not going to see that dramatic a decline in 1999," Semico's Garber said. "They'll see a much less dramatic price decline."
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