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Makers shifting to high-capacity memory

Leading foreign manufacturers are boosting production of 64-megabit memory chips, anticipating a transition that may be delayed.

Leading foreign manufacturers are boosting production of 64-megabit memory chips as the industry anticipates a transition to the more powerful chips by desktop vendors.

But the transition will rely on other market forces besides production capacity.

Japanese and South Korean memory makers plan to expand output of 64-megabit DRAM (dynamic random access memory) chips by 50 to 250 percent by the end of the year.

Japan's NEC will double its monthly production to 10 million units by the end of the year, according to Nihon Keizai Shimbun, Japan's leading business daily.

Separately, South Korea's Hyundai and LG Semicon also said they would double production to 10 million 64-megabit DRAMs per month by the end of the year, Reuters reported. Samsung, which produced 40 million 64-megabit DRAMs last year, will produce about 140 million this year, Reuters said.

Toshiba has already said it plans to triple production to 10 million chips per month by March 1999, up from the 3 million per month planned this month.

The computer industry relies on 16-megabit DRAM chips to make up the memory modules found in today's desktop systems. 64-megabit chips can pack four times as much data onto a single chip, giving a standard-sized module four times the capacity. Currently, 64-megabit memory chips are used in pricier servers and workstations, but not standard PCs.

The transition will provide desktop buyers with vastly more memory capacity, but the shift to 64-megabit chips won't necessarily take place just for customer convenience, said Bruce Bonner, memory analyst at Dataquest.

Computer manufacturers buy memory on a cost-per-megabit basis, and traditionally, this group has shifted to the denser memory only when the more advanced memory becomes four times or less expensive than the current standard memory. Last fall, 64-megabit DRAM was on track to hit the 4X point in the third quarter, according to some analysts, although 16-megabit DRAM was dropping in price as well.

Since then, however, an oversupply in 16-megabit DRAMs has accelerated the price decrease in 16-megabit chips, postponing the crossover. Dataquest now expects the crossover to come in 1999.

"Unless they price them at a loss, they aren't going to be able to sell them at a price that makes people want to buy them," Bonner said.

Memory makers themselves seem to acknowledge this, as earlier this year several firms put off opening 64-megabit DRAM plants because of high capital costs and the soft market.