Oversupply sends DRAM prices to one-year low

IDG News Service - DRAM chip prices reached a one-year low on Tuesday and approached their cheapest ever due to a post-holiday oversupply. The cheap memory chips are pushing PC prices lower too, a Taiwan-based trading platform said.

Prices for commodity 1-Gbit DDR3 DRAM chips dropped to an average of $0.84 per unit from historic highs around $2.80 in April and May last year, said Ivan Lin, publicist and editor with DRAMeXchange. Prices hit a record low of $0.81 per chip in March 2009, according to the exchange's daily surveys.

DRAM began losing value most recently in December as the Western holiday shopping season wound down, Lin said. But major manufacturers such as Elpida Memory, Powerchip Semiconductor and Samsung Electronics kept pumping out chips to stay competitive, he said.

Increased factory capacity has also held prices in check despite warnings of a DRAM shortage due to problems obtaining equipment and phasing in new technology.

PC makers typically spend about 10%, or $20 to $36, of a PC's total manufacturing cost on DRAM, Lin said. Lower DRAM prices allow PC manufacturers to cut prices or to offer improved performance for the same price by adding more memory.

From December, PC makers chose to discount some of their stock, said Helen Chiang, research manager with IDC in Taipei. "They had some space to do promotions," she said.

That trend stands to hold through the first quarter of this year as memory prices should remain low through March, Lin said. Prices would then climb again in the second quarter as demand picks up.

"It's seasonal," said Eric Tang, Vice President of Taiwan-based Powerchip. The island's largest memory manufacturer with an annual capacity of 130,000 wafers has adjusted production based on the price drops. "We usually don't see much sales in the first quarter, but in the second they should increase."