Japanese memory companies are delaying plans to expand their fabrication plants, responding to the continuing decline of memory prices.
Hitachi (HIT) and Toshiba will postpone opening new "fabs" for 64-megabit chips because falling memory revenues don't justify the investment costs, according to a report in Japan's Nihon Keizai Shimbun.
The change in plans comes as a result of the continuing slide in memory pricing. An excess of manufacturing capacity developed in 1995. In turn, this has resulted in a glut of memory, rock-bottom pricing, and lower revenues for manufacturers.
Lower prices, however disastrous for the manufacturers, have been a boon for consumers, who have experienced lower desktop prices as a result of the glut.
64-megabit DRAM chips began the year at $75 before dropping to $57 by the end of the second quarter and $49 at the end of the third quarter. More recently, the chips cost just about $30, according to Dataquest analyst Mark Giudici.
"We expect them to continue to come down over time," Giudici said, predicting 64-megabit DRAMs would be priced around $21 by the end of 1998.
"That's the normal earnings curve of the introductory phase, where you see a pretty steep shift."
64-megabit DRAMs are mostly used in servers and workstations today, but will start popping up in desktop computers next year.
Currently, 16-megabit memory chips are prevalent in the PC industry. 64-megabit chips can pack four times as much data onto a single chip, giving a standard-size memory module four times the capacity. In 1998, new modules containing 64-megabit memory chips will allow PCs that currently come with 16 megabytes (MB) of memory to include 64MB.
Prices in 16-megabit chips have been in a similar slump. 16-megabit chips have dropped from the $12 range in early 1996 to above $7 at the start of 1997. Current prices are as low as $4 a unit in the spot, or surplus, market.
To add to manufacturers' woes, a South Korean government study recently concluded that aggressive sales of 16-megabit chips--currently underway as manufacturers move to liquidate supply--could detract from sales of 64-megabit memory chips, and thus lead to a glut in the higher-capacity chip next year.