Memory makers expect rise in DDR3 demand in second half

Inotera has started pilot production of 1Gb DDR3 DRAM and plans to have the chips in mass production by Q3 to meet growing demand

The DRAM chip next in line to become mainstream for PC users, DDR3 (double data rate, third generation) will start to find its place in significantly more PCs by the third quarter of this year, Taiwanese DRAM executives said Tuesday.

Inotera Memories, a DRAM joint venture by Qimonda and Nanya Technology, started pilot production of 1Gb DDR3 DRAM this year, and plans to have the chips in mass production by the third quarter to meet growing demand.

"There is already demand for DDR3, and it will increase as the year goes on," said Charles Kau, president of Inotera, during a news conference in Kuei Shan, Taiwan.

Pai Pei-lin, a vice president at Nanya Technology, forecast that 30 percent of DRAM demand in the fourth quarter will be for DDR3.

That's a significant share of the DRAM market, and indicates the heyday for DDR2 (double data rate, second generation) may be nearing an end. DDR2 has been the main variety of DRAM used in PCs and laptops for the past few years. DDR3 is an incremental improvement over DDR2, offering users faster speeds, lower power consumption, and higher bandwidth.

Some companies are already shipping DDR3 memory, including Samsung Electronics, but the chips are going into only a small portion of PCs currently rolling off production lines.

The current DRAM glut is changing that. For the last year, DRAM makers have been suffering from falling prices for the chips they make, and most companies will likely post a loss for the fourth quarter, when DRAM prices fell off a cliff.

The contract price of 1Gb DDR2 chips that run at 667MHz fell to $1.81 each as of Jan. 21, according to DRAMeXchange Technology, which operates a clearinghouse for the chips. Prices of the chips were at $3 at the start of October, when the current price slump hit.

Most companies can't make money with DDR2 prices so low. On Tuesday, Inotera Memories reported an NT$3.7 billion ($114.3 million) loss for the fourth quarter of 2007. Nanya Technology reported an even worse loss of NT$8.2 billion for the same time period.

For users, the good news is that during chip gluts, DRAM makers often try to rush new technology to the market in a bid to increase sales of higher-margin products. That means DDR3 may arrive sooner than it might have and at a lower price to boot.

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