Good news for users: flash, DRAM prices falling

Prices of the NAND flash memory and DRAM chips are falling, and its getting near time for users to pick up bargains.

It's about that time of year again when users who need IT products with heavy memory chip content should stand by for bargains. Prices of the NAND flash memory chips used to store data in gadgets ranging from digital cameras to MP3 players, as well as DRAM (dynamic RAM), which store data temporarily and play a large role in the speed of a PC, are falling.

The main reason for price declines is the time of year. The slowest time of year for IT product sales is normally between April through June, with some hangover as the summer drags on and people go on vacation. By mid-May or June, it will be a great time to pick up extra DRAM modules to help perk up a PC or even look into digital music players. Often, when memory prices decline, companies that make MP3 players add more memory to new models and slash prices on older ones.

DRAM prices on the global spot market have dropped to recent lows of around US$4.58 per chip for the most widely used 512Mb version of DDR2 (double data rate 2) in the past week, compared to US$5.45 a month ago, according to information from researcher DRAMeXchange Technology. It's been worse for NAND flash, where prices for the most widely used 2G-bit chips slid 33 percent in the first half of March.

"Moving ahead to (the second quarter), DRAMeXchange is still doubtful about any price rebound," it said in a Monday report.

Nam Hyung Kim, a memory industry analyst at iSuppli believes NAND prices have declined due to weak demand for digital music players. Brisk holiday demand late last year gave way to a short period of shelf restocking by retailers early this year, but now demand has slowed.

The slowdown prompted iSuppli to revise down its forecast for the global NAND flash memory market on Tuesday to US$13.8 billion from US$16 billion previously. Last year, the market was worth $10.8 billion.

There's plenty of other evidence for weak flash memory prices. Lexar Media Inc., a developer of NAND devices, on Tuesday updated its earnings forecast for the current quarter ending March 31 to a level far below estimates. It didn't say why it revised its guidance, but analysts reckon it's because of weak NAND flash demand.

It's new numbers miss by a wide margin. The company expects revenue for the period of up to US$130 million, with a US$30 million loss this quarter, compared to analysts estimates of US$200 million in revenue and a US$16 million loss.

"We believe weak flash demand and prices...were the primary reason for the shortfall," said investment banking firm Credit Suisse in a Tuesday research note.

It's important for users to note that the current downtrend in memory prices won't last. Demand for PCs and other IT products normally pick up later in the year, especially near back-to-school time in August or September. Market researcher Gartner believes flash memory prices will likely strengthen later in the year, while the DRAM market continues to soften -- especially since Microsoft Corp. decided to delay the launch of its new operating system, Vista.

"Impact from Vista was originally expected to be minimal: The delay will, however, affect PC shipments at the end of 2006. Some users may delay purchases until the beginning of 2007," Gartner said Monday. PCs are the largest users of DRAM chips.

The global market for DRAM chips is expected to rise to US$26.4 billion this year, from US$24.8 billion last year, according to iSuppli.

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