Thoughts on the memory market shakeup, from the inside

Before I took over as the CEO of OCZ Technology, I got my start as a freelance writer.  Over the last few weeks, there’s been an influx of rampant speculation on DRAM pricing, but don’t be so quick to believe everything you hear.

As the DRAM spot market remained relatively soft since its recent collapse, we’ve seen the overall price on standard speed memory modules in the channel decrease -- which has in turn driven down the price of high performance memory modules. This is good news for the consumer, but with the increased activity of the market in the past two weeks and general consumer demand on the uptrend we could be in for a change. Let’s take a look at what’s been happening in the spot market.

Taiwan Based DRAM manufacturer Powerchip Semiconductor reduced its weekly output of chips and we have seen the price climb on these parts by over 25% in the past two weeks. Powerchip pricing for DDR2 667 MHz parts -- which are commonly used in standard speed grade memory modules -- is viewed by other manufacturers as a barometer for pricing and the often adjust their prices accordingly.

The great debate among modules houses these days is whether Powerchip is holding inventory,  swapping fab capacity to higher density parts or implementing previously scheduled new die shrinks. If there are indeed swapping capacity then in the short term we will see a continuation of price increases, which will soon be passed on to consumers.

As usual this is based on demand from consumers; if consumer demand switches to the higher density 2GB modules at its current pace, look for 4GB kits to go up short term and stabilize long term as supply ramps up. 

In terms of high performance memory, the story on the spot market is Micron may start swapping capacity away from 64x8 over to higher density 128x8 parts. If true what does this mean in the short term? You guessed it, increased prices on 1066 MHz DDR2 -- but conversely this will also decrease the price of 2GB modules when Micron gets its full capacity online.

Of course the question remains whether or not to buy now or buy later.  Traditionally any changes in the memory spot market affect retail pricing two to three weeks after the fact.  Coupled with the major Intel CPU price cuts coming next month, you can be sure demand for more memory in the channel will go up this July. And we all know what happens when demand goes up with low supply.

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