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DRAM prices concerns for the industry

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CIOL Bureau
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SAN JOSE, USA: Rising DRAM prices could prompt many PC OEMs to decrease their memory content for chosen products, according to an analyst with Gartner Inc.

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Since sometime, there have been shortages of DRAMs, leading to increase in prices for both DDR2 and DDR3. Currently, PC OEMs have reached the highest point in the midst of the price hikes.

''With early April contract pricing increasing by about 5 percent on the earlier month for both DDR2 and DDR3 devices, this most recent price increase has led some chief PC vendors to slash content for each box,'' said Andrew Norwood, an analyst with Gartner, in a report.

According to Gartner, average spot pricing across all DRAM densities and technologies reduced by 0.5 percent compared with the earlier week, standing at $3.02 on a 1-Gb equivalent basis.

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He also said, ''PC dealers have been complaining regarding the increase in price and the increasing bill of materials (BOM) cost of DRAM for a while, however they have been unwilling to modify configurations for competitive and contractual reasons. The newest increase is pushing the price of 4GB of DRAM to $90 or above and close to 15 percent of the BOM was the ultimate straw.''

A few of them but not all PCs are impacted. ''The result of the PC dealers moving to slash content is difficult to measure, since it is not as straightforward as 4GB machines moving to 3GB and 3GB moving to 2GB,'' he said.

He said ''First, the reductions will be dissimilar for the consumer sector against the professional market. The professional is more of a 'pull' model, whereby the buyers put together the machines, whereas the consumer is a 'push' model, whereby the vendors put together the PCs and display on the stores shelves,''.

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''The PC vendors' aspiration to decrease costs shall be felt most in the consumer space, since this is where they have the majority control, however these changes will not appear overnight,'' he said. ''A chief segment of the marketplace is determined by contracts with the big retailers, and these contracts will have to be transformed with lower specification ahead of the content being reduced.''

Not long ago, chip makers could not purchase an order in the midst of the dreadful recession. Currently, amidst the recovery, there are extensive reports of component deficiencies in the supply chain, which include analog, NAND and DRAM.

''On the basis of current checks all through the supply chain we have found that DRAM remains tense all over the industry. PC and server demands are influencing the prices to become higher,'' said Daniel Amir, an analyst at Lazard Capital Markets, in a report.

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