Memory prices fall

It’s about that time of year again when users who need IT products with heavy memory chip content should stand by for bargains. Prices of the NAND flash memory chips used to store data in gadgets ranging from digital cameras to MP3 players, as well as DRAM (dynamic RAM), which store data temporarily and play a large role in the speed of a PC, are falling.

The main reason for the decline in prices is the time of year. The slowest time for IT product sales is normally between April and June, with some hangover as the summer drags on and people go on vacation. By mid-May or June, it will be a great time to pick up extra DRAM modules to help perk up a PC, or even look into digital music players. Often, when memory prices decline, companies that make MP3 players add more memory to new models and slash prices on older ones.

DRAM prices on the global spot market have dropped in the past two weeks to recent lows of around US$4.58 per chip for the most widely used 512M-bit version of DDR2 (double data rate 2), compared to $5.45 a month ago, according to information from researcher DRAMeXchange Technology Inc. It’s been more dramatic for NAND flash, where prices for the most widely used 2G-bit chips slid 33 percent in the first half of March.

“Moving ahead to [the second quarter], DRAMeXchange is still doubtful about any price rebound,” it said in a report Monday.

Nam Hyung Kim, a memory industry analyst at iSuppli Corp., believes NAND prices have declined due to weak demand for digital music players. Brisk holiday demand late last year gave way to a short period of shelf restocking by retailers early this year, but now demand has slowed.

The slowdown prompted iSuppli to lower its forecast on Tuesday for the global NAND flash memory market, to US$13.8 billion from $16 billion previously. Last year, the market was worth $10.8 billion.

There’s plenty of other evidence for weak flash memory prices. Lexar Media Inc., a developer of NAND devices, updated its earnings forecast Tuesday for the quarter ending March 31 to a level far below estimates. It didn’t say why it revised its guidance, but analysts reckon it’s because of weak NAND flash demand.

It’s new numbers miss by a wide margin. The company expects revenue for the period of up to $130 million, with a $30 million loss, compared to analysts’ estimates of $200 million in revenue and a $16 million loss.

“We believe weak flash demand and prices … were the primary reason for the shortfall,” investment banking firm Credit Suisse said in a research note Tuesday.

It’s important for users to note that the current downtrend in memory prices won’t last.

Demand for PCs and other IT products normally pick up later in the year, especially near back-to-school time in August or September. Market researcher Gartner believes flash memory prices will likely strengthen later in the year, while the DRAM market continues to soften — especially since Microsoft Corp. decided to delay the launch of its new operating system, Vista.

“Impact from Vista was originally expected to be minimal: The delay will, however, affect PC shipments at the end of 2006. Some users may delay purchases until the beginning of 2007,” Gartner said Monday. PCs are the largest users of DRAM chips.

The global market for DRAM chips is expected to rise to $26.4 billion this year, from $24.8 billion last year, according to iSuppli.

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Jim Love, Chief Content Officer, IT World Canada

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