Memory chip prices fall

Memory chip prices DRAM slid again in June, continuing a trend that started last year, as U.S. makers become more of a force in the market.

DRAM, or dynamic random access memory, is the principal type of memory used in almost all PCs. In today's PCs, 16-megabit DRAM chips are the most popular.

The price drops may not be readily apparent, however, as PC manufacturers have over the last year started including more memory in standard computer configurations rather than dropping the prices of systems.

In Japan, the largest domestic manufacturers such as NEC and Fujitsu dropped the price of 16-megabit chips 10 percent from May to between $6.20 and $7 for large orders, according to a report in the Nihon Keizai Shimbun, Japan's largest business daily.

Prices for 16-megabit EDO DRAM chips slipped 14 percent to around $6.20 from May, according to the report.

The prices have declined for two straight months because of increased production by U.S. chipmakers. Also, lower PC demand in the first half of the year has resulted in fewer chips being bought, according to the report.

U.S. chipmakers Micron Technology and Texas Instruments, in particular, have been gaining market share in the DRAM market even as prices of the chips continue to drop, according to Brian Matas, senior analyst with Integrated Circuit Engineering.

"Japanese manufacturers were wanting to move to production of 64-megabit DRAMs. That allowed the market to open up more for 16-megabit manufacturers, Micron especially. Probably Micron and Texas Instruments have been able to capture a little more of the market as a result of other players moving on to the 64-megabit market," Matas says.

Japanese manufacturers such as NEC, Toshiba, Fujitsu, and Mitsubishi are trying to move to the next generation of 64-megabit chips to boost profitability since it is more efficient for manufacturers to make the denser 64-megabit chips.

Meanwhile, South Korean companies such as LG Semicon and Samsung have also been cutting back production of 16-megabit chips.

The market experienced a short upswing as 16-megabit DRAM production slowed earlier this year, but memory manufacturers in the U.S. see the price moving down again, observes Bob Snowden, a purchasing director for First Source International, a large computer equipment reseller. First Source buys DRAMs for use in the memory modules it manufactures.

"The way its been going the last three years in the DRAM market, it's been impossible to book a quarter of business. We have three to five days of inventory on the shelf at all times. That lets us be competitive in this market," Snowden says. The result for consumers is that some 16 megabyte modules have been selling for about $65 to $70, he says.