Memory chipmakers are bracing for tough quarter due to falling prices of DRAM chips, expanded factory output, and over forecasted Vista demand, with some manufacturers selling their chips below the cost of production cost.

The average spot prices for mainstream DRAM have plunged 65%, which according to market research company Gartner, is the biggest fall in the price of DRAM this decade.

The DRAM industry, whose demand relies on sales of PCs and Internet-server systems, is expected to experience an 11.1% drop revenue in 2007, according to Richard Gordon, research vice president at Gartner.

Another research firm, iSuppli, said that based on its calculations the DRAM sector is expected to post a weighted negative operating margin of 19% in the second quarter.

The DRAM market’s woes were caused by sluggish PC shipments and the rising number of factories built last year and coming online this year to produce memory chips.

In-Stat, says the demand for new PCs has not been impacted significantly by Vista’s delay and subsequent release.

“With the recent release of Vista, a short-term rise in PC demand is anticipated,” said Ian Lao, In-Stat analyst.

“System sales that had been muted waiting for systems pre-loaded with Vista rather than XP are expected to work through sales channels in the next two quarters. However, these sales represent an offset from last year rather than actual new demand creation.”

Vista demand was supposed to fuel the DRAM chip market this year, as PCs shipping with a premium version of Vista require at least 1GB of RAM in the form of two 512MB sticks. It was also expected that users with PCs that shipped with 512MB would look to upgrade their memory.

Analysts expect some DRAM makers to swing back to profitability later this year, when PC sales are usually stronger in the back-to-school and holiday buying seasons. Vista migration rate is also expected to pick up in 2008.

Related:

Vista and DRAM falling prices raises DRAM usage

Now Vista blamed for bailouts

Vista’s release not having major impact on PC sales

How much RAM does Vista really need?

Vista runs low or out of memory when copying lots of files

Entry was posted on Monday, June 4th, 2007 at 11:57 pm under Uncategorized.  Print This Post

Read more entries by Ruben Francia.
Stumble It!