DRAM makers see prices rising in Q2

Prices of the most widely used DDR2 chips are up 7.4% since the end of March

Dynamic RAM chip makers are forecasting higher prices for DDR2 (double data rate 2) memory chips over the next three months, and current trends could mean they will remain strong all year.

It's a forecast that users who need memory for PCs and other devices should listen to, because a number of factors are sending DRAM prices higher, even as the PC market enters its weakest season of the year, the second quarter.

U.S. DRAM maker Micron Technology Inc. kicked off the earnings season for DRAM makers early last week by saying prices for the chips had rebounded after dipping in March.

"DRAM demand exceeded supply in the second half of the quarter," said Mike Sadler, a vice president at Micron, during the company's investor conference. He credited growing PC shipments, demand for more memory per PC, increased laptop sales and the market shift to DDR2 from older-generation DDR memory for price gains in DDR2.

DRAM demand will rise 50% to 60% this year compared with last year, he added.

Prices for the most widely used DDR2, 512MB chips that run at 533 MHz, have risen 7.4% since the end of last month to $4.92 today, according to DRAMeXchange Technology Inc., which operates an online clearinghouse for memory chips.

Samsung Electronics Co., the world's largest DRAM maker, said during its first-quarter investor conference late last week that it saw DDR2 prices strengthening in the second quarter.

Taiwan's Nanya Technology Corp. and Inotera Memories Inc. echoed the sentiment today, predicting stable to higher prices in the April-June period and into the third quarter.

"Although the second quarter is normally the weak season, it doesn't look bad right now," said Pai Pei-lin, a vice president at Nanya Technology.

"The DDR2 market will really take off after the latest microprocessors from [Advanced Micro Devices] hit the market," he said. AMD is expected to launch its first microprocessors made for use with DDR2 in June. Currently, Intel Corp. microprocessors work with DDR2.

One wild card that companies cited as a possible downer for DRAM prices was Microsoft Corp.'s delay in shipping Vista, which could affect PC shipments later this year. DRAM makers had expected Vista to cause PC makers to use more memory per box. But the delay in launching the operating system could cause some users to put off buying new PCs, which would weaken DRAM demand.

But most companies say PCs shipping later this year will be Vista-compatible, made with components and memory content to allow them to be easily upgraded to the new operating system. In addition, PC sales tend to pick up around August as parents buy new PCs for their kids ahead of the school year. Strong PC sales cause DRAM prices to rise, since most of the chips end up in desktops and laptops.

Inotera, a joint venture between Nanya Technology and Germany's Infineon Technologies AG, also sees solid prices for DDR2 during the second quarter and predicted that the trend will boost its earnings.

"The second quarter will be better than the first quarter," Charles Kau, president of Inotera, said at the company's first-quarter investors' conference. Inotera is mainly producing DDR2 chips that run at 533 MHz and 667 MHz, he said.

Copyright © 2006 IDG Communications, Inc.

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