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RAM price increase may be short-lived
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August 6, 1998 by Andy Santoni |
From...
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(IDG) -- Memory prices are once again starting to climb, but industry observers caution buyers not to rush out to stock up as they prepare for Windows NT upgrades because the uptick will likely be followed this winter by the traditional price cuts.
Even with demand continuing to grow and with chip makers cutting back on production, prices are not likely to continue rising after the fall consumer buying season, said Angelo Matthews, director of equity research at CIBC Oppenheimer, in San Francisco.
"Even with bit growth at more than 70 percent per year, capacity is still 20 percent over demand," Matthews said.
The current price rise results from PC manufacturers, who have been reducing on-hand inventories over the past year, stocking up for the back-to-school season, Matthews said. At the same time, these OEMs do not want to be caught short in October or November when consumers are buying for the holidays, so they are placing orders now.
DRAM manufacturers have also been cutting back on production to balance supply and demand.
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"DRAM suppliers are starting to enforce discipline," Matthews said.
The production cutbacks may turn into rising prices in the third quarter of this year, said Mario Morales, semiconductor program manager at International Data Corp., in Mountain View, Calif.
Prices have been firming as PC makers replenish low inventories in anticipation of sales this fall, Morales agreed.
"We're seeing most PC companies at manageable inventory levels," Morales said.
These manufacturers are beginning to stock up so they will not have to pay higher prices if their projected boom in PC sales materializes, Morales said.
However, higher memory prices will affect only certain types of modules, Morales said. For example, chips that meet PC-100 specifications may remain in short supply.
One memory module supplier, while hoping for an increase in sales, does not see current prices as a reason to stock up now.
Although prices for memory have been flattening over the past month, "I would consider that a short-term phenomenon," said Stuart Atkins, marketing analyst at Kingston Technology, in Fountain Valley, Calif.
Atkins expects demand for PCs to remain soft through the third quarter of this year, and even with inventory burned off by the fourth quarter, dramatic price increases are unlikely.
"I don't see a major trend in prices rising right now," Atkins said.
Atkins also pointed out that PC sales declined by 10 percent in the first quarter of this year, and if the same occurs next year, memory prices are likely to fall, too.
Andy Santoni is a senior writer for InfoWorld.