Need DRAM? The best prices are still to come

Prices for the most popular type of computer memory chips have fallen by more than 40 percent since the start of the year, and users may get even better bargains if they wait until the middle of the year, observers said.

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The plummeting price of DRAM (dynamic RAM) chips bodes well for consumers buying a new PC or looking to add a bit of speed to their aging computers. PC vendors often put a bare minimum of DRAM into new computer systems to keep costs down, but many software applications will perform better the more RAM they have available.

The ongoing price declines should also prompt DRAM makers to more aggressively promote the next generation of double data rate DRAM, dubbed DDR2, on which profit margins are greater. That could cause DDR2 to overtake DDR as the most widely used type of computer memory in the second half of the year, said Crystal Lee, DRAM industry analyst at ABN-Amro in Taipei.

In March, DDR2 accounted for a fifth of all DRAM production, according to DRAMeXchange, an online clearinghouse for the chips.

Prices for both types of memory have been falling almost in tandem this year due to overproduction, but DDR2 retains a slight premium since it is new. DDR2 is gaining in popularity for its faster speeds and lower power consumption, which saves battery life in portable systems.

The price of the current mainstream memory chip, 256Mb DDR-400 DRAM running at 400MHz, fell to $2.34 per chip early Wednesday, down from $4.04 at the beginning of the year, according to DRAMeXchange.

Prices could drop to $2.00 each in May, and even slip to $1.50 in a "worst case scenario" for memory makers, Lee said. "Once that happens, the transition to DDR2 will move ahead," she said. Most producers start to lose money on the chips at around the $2.00 to $2.50 level, so they would look to DDR2 for better profits.

Memory chip prices are not expected to increase again until later this year, if they increase again this year at all, observers said.

The falling prices will likely cause two major changes in mainstream DRAM technology this year: the transition to DDR2 from DDR, and to 512Mb chips from 256Mb ones, said Joyce Yang, a manager at DRAMeXchange. The company expects 512Mb DDR2 running at 533MHz to become the next mainstream chip, beating out the 400MHz version of the same chip, because the 533MHz chip runs faster with the front side bus used in newer PCs.

But prices on both kinds of chips should continue to decline in the near term, thanks to increases in production and because the second quarter is traditionally the slow selling season for PCs. Users looking for more DRAM -- or a new PC -- should aim to make their purchase in late June, before makers begin restocking ahead of the back-to-school season, said Lee.

The lull in PC demand from April to June usually prompts computer makers like Dell and Hewlett-Packard to offer rebates or giveaways, like doubling the amount of DRAM in a system. This year has been different, however. Dell has run a few one-day DRAM specials, but both companies have been using other incentives seen as more attractive to mainstream users, like price reductions, extended warranties, and upgrades to flat panel display screens. HP has also been offering a free DVD/CD-RW combo drive with its HP Pavilion zc2800 notebook computers.