Dataquest is forecasting a continued oversupply for the memory market, although perhaps not as dramatic an imbalance as during 1996.
A new report said that the DRAM memory chip "oversupply rate" will likely run at seven percent per quarter for most of the year, down from the more than ten percent in the first half of 1996.
This means that memory prices are not likely to drop any more than they already have, but won't likely rise much, either.
DRAM is the principal type of memory used in almost all PCs. In today's PCs, 16-megabit DRAMs are the most popular. Manufacturers are trying to move to the next generation of 64-megabit chips, but for many, these efforts have been stalled by drops in prices in 1996 that have rendered many memory vendors cash-poor.
Ron Bohn, principal analyst for Dataquest's worldwide research operations group, doesn't think the industry will suffer another memory glut like the one that made prices tumble last year. "The business environment during early 1997 looks more stable for some DRAM suppliers than it did the same time one year ago," he said.
Nonetheless, he added the industry "should not get overly confident. The good news is that PCs will continue to consume DRAM voraciously. The bad news is that there is an enormous production of [16-megabit] memory chips, and this will extend the oversupply into 1998."
Japanese electronics makers recently said they would cut back investment in microchip production facilities in the business year starting on April 1.
After showing a slight improvement in the Christmas season, prices of 16-megabit DRAM chips--currently the mainstay computer memory chip--sagged again in the January-March quarter.
Amid a supply glut following a worldwide slowdown in personal computer sales, some chip makers began selling 16-megabit DRAMs at around $6 on the spot market after the turn of the year, dragging down the whole market, analysts said.