1Gbit DRAM replaces 512Mbit as mainstream PC chip

Analysts say move indicates most new PCs are finally running Microsoft Vista OS

The 1Gbit dynamic RAM chip replaced 512Mbit DRAM as the mainstream memory capacity in the PC industry as of October, a sign most PCs coming off production lines now use Microsoft Corp.'s Vista operating system, according to DRAMeXchange, a Taiwanese market researcher.

All of the premium versions of Vista require more DRAM than the predecessor Windows XP operating system.

The switch to 1Gbit DRAM technology has taken longer than expected by chip makers, which had built new factories in anticipation Vista would take the PC market by storm this year and quickly antiquate XP. Instead, the adoption of the new operating system is moving along at a steady pace, albeit slower than the DRAM industry expected.

The early heavy investment in DRAM factories caused a massive oversupply of the chips, causing prices to fall by more than 70% this year, near or below the cost of production for most companies.

According to DRAMeXchange, which runs an online trading site  for the chips, the contract price of 667-MHz 1Gbit, double-data rate, second-generation DRAM chips now cost $2.63, 12.5% less than two weeks ago and a new low for this year.

Analysts said the market might not turn around until late next year, and possibly later if companies keep building new production lines. "We do not expect memory chip makers to show any improvement in profitability at least until [the second half of 2008] unless there is stabilization or a recovery in pricing," said Warren Lau, an analyst at Macquarie Research in Sydney.

Samsung Electronics Co. already increased its production line spending plans 23% this year, he said, and the aggressive stance will likely cause rivals such as Elpida Memory Inc. and Hynix Semiconductor Inc. to follow suit so they can protect or increase their DRAM market share.

Increased spending amid a chip glut should keep DRAM chips cheap for a while as market prices normally take about a month to filter down to users, according to a DRAMeXchange analyst. The analyst also noted that PC vendors often increase the amount of DRAM per computer when prices are low, or offer additional DRAM as an incentive to buy a new PC. Also, the price of DRAM modules found in stores will fall as retailers clear out their older, more expensive inventory.

Contract DRAM prices are renegotiated every two weeks between DRAM makers and PC vendors such as Hewlett-Packard Co. and Dell Inc. About 80% of DRAM is sold by contract, while the rest is sold on a spot market similar to commodities trading in oil and gold.

Copyright © 2007 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon