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HolidayBuyer's Guide
Tech Industry

Stability seen for memory market

Dynamic RAM is starting down the road to recovery, but the market for the technology is still in guarded condition, according to a new report.

Dynamic RAM is starting down the road to recovery, but the market for the technology is still in guarded condition, according to a new report from market researcher iSuppli.

Caution is the word for DRAM makers, as a recovery could easily be derailed by hiccups in the demand for PCs, iSuppli said. Gartner issued a similar report in August and also warned that changes in demand or hasty production increases could erase most of the progress.

After dropping quickly in the second quarter, DRAM prices stabilized in the third quarter, iSuppli said. Average prices for bare DRAM chips, which are purchased and assembled into modules for use in computers, rose 20 percent from $4.42 to $5.30 in the third quarter.

The price increases came as inventories fell and demand rose, the firm said in its report. Some PC makers have adjusted prices or configurations on their holiday 2003 PC models to compensate for increased DRAM prices.

Still, iSuppli's forecast for DRAM revenue for 2003 remains unchanged. The firm predicts that worldwide DRAM revenue will increase by 8.3 percent year over year from 2002 to $16.7 billion.

iSuppli described the increase in DRAM demand and prices in the third quarter as seasonal, meaning they were related to the PC industry preparing for the holiday sales period, and it warned against overconfidence about a quick DRAM recovery.

"Although most indications point toward a recovery, iSuppli still maintains cautious optimism about the near-term DRAM market prospects. The major PC market, corporate PC buyers, is only slowly recovering. DRAM price increases in the third quarter had more to do with supply issues and speculation buying activity, rather than real demand," the firm said in its report.

While consumer PC sales have remained steady and sales to businesses have begun picking up in recent months--a good sign for DRAM--iSuppli, like most other industry observers, predicts that widescale business PC buying won't pick up until 2004.

iSuppli's forecast for worldwide DRAM revenue in 2004 is more optimistic. Revenue will increase more steadily next year, rising 27 percent year over year to $21.2 billion, the El Segundo, Calif., firm said.

While lower inventories and increased unit sales generally lead to higher prices, iSuppli predicts that manufacturers will increase production, which will help temper price increases.