64-megabit DRAM prices fall

Prices for 64-megabit DRAM memory chips have fallen to four times the cost of 16-megabit chips in the Japanese spot market, a harbinger that 64-megabit DRAM may be incorporated into desktops sooner than expected.

Spot prices for 64-megabit chips have fallen to 2,000 yen, some 70 percent since the beginning of the year, according to Nikkei News, a Japanese news service. (2,000 yen amounts to approximately $16.) Meanwhile, spot prices for 16-megabit memory chips have fallen to about 500 yen per chip, or $4, down some 40 percent since the beginning of the year.

The 4X pricing is a crucial milestone, according to analysts. Desktop computer vendors typically move to the next generation of memory when it drops to four times the cost of the memory they currently use. The 16-megabit DRAM is the de facto standard for desktops, while 64-megabit DRAMs are used in workstations and servers. Therefore, a shift to the denser 64-megabit is becoming tenable with the price drops.

"When it becomes four to five times more expensive [than 16-megabit chips[, it will become a much more common part," George Iwanyc, an analyst at Dataquest, told CNET last week. "If manufacturers think that it's sustainable, they will start to build this parts in to their computers."

The shift, however, won't occur overnight. Spot market prices are generally lower than prices in the contract market, where most major computer OEMs buy their memory, according to Iwanyc and others. A shift to 64-megabit DRAM would allow computer vendors to squeeze in more memory for less cost over time.

Nonetheless, the drop in prices in the spot market indicates that stabilization has yet to come to the memory market. A study published last week by Nikkei Market Access reported that the volume price for certain computer vendors has declined from $32.80 to $25.40.

A surfeit of memory chips has been driving the price of memory down drastically all year. Plant expansion in 1995 led to a an oversupply of memory chips in late 1996. Since then, various manufacturers have either ceased production or exited the market entirely. The price, however, continues to drop.

Slowing demand for computers in Japan and elsewhere in Asia has compounded the problem, driving the price down further. Meanwhile, Taiwanese manufacturers announced in October that they planned to ramp up production of memory chips in an effort to become the world's No. 3 supplier, behind South Korea and Japan.

The spot market prices are also below manufacturing costs, at least for 16-megabit DRAM. They cost $5.50 to make, according to various reports.