DRAM price collapse not a sign of PC problems

It's that time of year again when PC assemblers and other companies that require DRAM (dynamic RAM) assess whether they've got enough for the end-of-year holiday sales, and turn around and dump leftover DRAM back onto the market. By the look of falling prices in the DRAM market, they appear to have plenty -- but it's not a sign of any problems in the PC market, analysts say.

It's a yearly trend that has again arrived, and DRAM prices should continue downward for the next few weeks since companies throughout the PC supply chain are under growing pressure to sell off excess inventory, according to DRAMeXchange Technology, an industry researcher.

The DRAM market behavior is normal for this time of year because retailers have nearly finished stocking their shelves with PCs and laptops ahead of the holidays. Sometimes weakness in the DRAM market foretells of slipping PC sales, but that's not the case this time around, say industry analysts. PC sales are still in line to meet high expectations set earlier this year.

"This is very normal behavior for the DRAM market, it has nothing to do with weakness in PCs. The trouble is PC makers haven't been adding more memory per box," said James Huang, chip industry analyst at SinoPac Securities in Taiwan.

The contract price PC makers like Dell pay for DRAM tumbled nearly 6 percent for chips to be delivered in the second half of November, while the spot market price of the most widely used DRAM, 256Mb DDR (Double Data Rate) chips that run at 400MHz, has plunged nearly 14 percent over the past month to $2.17 per chip, according to DRAMeXchange.

For a number of reasons, including high DRAM prices and less DRAM added per PC this year than normal, the market doesn't reflect what's going on in PCs today. One point it does reflect is the high volume of PCs being sold to users in emerging markets, where PC assemblers tend to add as little DRAM as possible since cost is a high concern, analysts say.

Last month, market researcher IDC said third-quarter PC sales grew at a blistering 17.1 percent due to strong sales of low-cost PCs and notebook computers.

While PC sales are expected to remain brisk through the end of the year, it's quite another story for DRAM. Memory prices should remain on a downward path as demand continues to shrink significantly in December, and decline further during the first half of next year, DRAMeXchange says.