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Thanks for the memory

For the longest time, memory makers were oblivious to the way the rest of the computing industry operated: better technology at lower prices.

For the longest time, memory makers were oblivious to the way the rest of the computing industry operated: better technology at lower prices.

It was almost as if they had come up with the phrase, "the more things change, the more they stay the same." Never mind that nearly everybody else in the industry--from chipmakers to storage device builders to software developers--could only dream of the life that the people in the DRAM business were used to: a steady rise in prices and healthy profits.

So it seems incredible to be reading news this week that prices for 16-megabit DRAM chips have fallen under a buck on the spot market. And this is but the latest news on the price-cut front. According to reports, the average price of dynamic random access memory chips fell to $1.98 this January, compared with $3.98 in January of last year and $22.27 in January of 1996.

And for this, we should all thank South Korea. For if Korean manufacturers had not gotten into the act in the mid-'90s, it is conceivable that prices would not have dropped this fast so quickly.

Before Samsung, LG, and Hyundai decided to get into the memory manufacturing business, this segment of the industry was dominated by the Japanese. The NECs and the Fujitsus seemed to operate under the premise of "compete but cooperate." They appeared to have perfected the art of coopetition long before Novell's Ray Noorda made it an industry buzzword. Apparently, the Japanese manufacturers didn't have any problems "agreeing" on DRAM prices. To be sure, the Koreans got into this business not simply to break the Japanese cartel but also to make money.

So before the Koreans jumped in, Bill Gates for sure was scratching his head as this anamoly on the DRAM front continued. He often stated Windows NT was slow to take off in the early '90s partly because DRAM prices didn't fall as rapidly as he had anticipated. He had expected that a typical PC in 1993-94 would be configured with 16 megabits of DRAM.

"Until 16MB of memory is commonplace, the volume will remain with Chicago. There will come a time, two to four years out, when we can take 16MB as a design point," Gates told Infoworld back in November, 1993. Chicago, of course, was the code name for Window 95.

Interestingly, when Windows 95 was released, Microsoft insisted that the operating system would run in 4 megabits of DRAM, knowing full well that requiring any more memory would spook users because the standard configuration of PCs at that time was 8 megabits.

Today, that memory configuration seems puny. The standard configuration is 32 megabytes of DRAM and, by next year, most PCs will come equipped with a once-unthinkable 64 megabytes.

Signs already point to this: Prices for these chips are approaching four times the price for 16-megabit DRAMs. Historically, when the 4X price point is hit, computer vendors switch to the higher density memory.

Of course, the access capacity coupled with the slowing demand for PCs has created a glut, which means that production is being curtailed and factories closed. And, yes, the South Koreans are leading this trend as well. But most experts believe that these moves are unlikely to reverse the price equation any time soon.

Then, too, there is the likelihood that Microsoft and others will build big, fat, memory-guzzling products that will easily require 64 megabits of memory, if not more.And users in turn will have to spring for that extra memory to truly "enjoy" their PC experience.

But for now we can all say thanks for the (cheap) memory.

When his memory serves him right, Jai Singh is editor of NEWS.COM.