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Fast memory prices stabilizing

If the high-speed memory prices appear to be stabilizing, it's partly because the chips are selling at close to cost.

High-speed memory prices appear to be stabilizing, but that's partly because the chips are selling at close to cost.

The average volume selling price of static random access memory (SRAM) chips has dropped to $3.34, a 26.6 percent decline since the beginning of the year, according to In-Stat, a Scottsdale, Arizona, market research firm.

SRAM is used as a high-speed memory buffer between the slower main memory and high-speed processor. Companies such as Micron and Motorola are large manufacturers of the product.

Cost, meanwhile, is around $3.00, and it won't get much below that, said Mark Giudici, director of semiconductor supply and pricing service at Dataquest.

"It might get below $3.00," he said, "But basically it's at cost right now." According to Dataquest, of 1MB SRAM chips range in price from $4.15 to $3.27, depending on the configuration.

Where the two research houses differ is in the future direction of the price. In-Stat forecasts that the average selling price will rise to $4.02 this month with a continued recovery due to rising demand.

"A slow recovery starts in 1998. Unit shipments will be up 5.1 percent with an average selling price improvement of approximately 1.3 percent, resulting in a modest revenue increase of 6.5 percent to $3.7 billion," said Jesse Huffman, senior analyst at SRAM in a prepared statement.

Giudici, however, said that prices will continue to slide despite increased demand. Chips configured as 32-by-32 1MB SRAM, which are used as cache memory, will drop from its current price of $3.27 to $3.04 by the fourth quarter of 1998. 128-by-8 1MB SRAM, meanwhile, will go from $3.68 to $3.12.

"Unit volumes are relatively strong. The demand picture for systems and cellular phones has been relatively strong," he said. "The situation has been in supply." Simply, too many manufacturers are pumping out more chips that can be absorbed at higher price.

SRAM is mostly sold to processor vendors (who package it with central processing units as cache memory) and consumer electronics vendors (who incorporate it into cellular phones and other devices).

The memory price funk began in 1996. A predicted rise in memory demand prompted a number of manufacturers to ramp up production for SRAM, DRAM, and flash memory. At the same time, manufacturing breakthroughs made it easier to enter the market.

At the beginning of 1997, 32-by-32 SRAM sold for $3.50. In 1995, the same chip sold for approximately $16.

"In SRAM, what happened was that everybody got the recipe at the same time," said Jim Handy, another Dataquest analyst.

That is, in late 1995, a Silicon Valley company called Galvantech devised an inexpensive process for SRAM manufacturing, and sold the plans to lots of companies, all of which built up production capacity to take advantage of the low-cost process.

"You had an oversupply as a result," Handy said.

Prices started their slide in early 1996 and have continued to this day. As a result of pricing pressures, foreign competitors have tried to dump chips in the domestic market for below cost, while some manufacturers have curtailed and even halted production altogether.