Experts: Memory prices going 'crazy'

The price of memory continues to soar, forcing PC prices up and as we approach Christmas, word is it's going to get much worse.

PC prices are being forced up by expensive memory and predictions of a severe shortage next year could force prices higher according to one analyst.

As previously reported on ZDNet DRAM prices have been rising rapidly in recent weeks. According to one ZDNet reader, the price of a 128MB chip (from Dabs.com) has risen from £79 two weeks ago to today's £180 price tag.

According to Dataquest analyst Richard Gordon, the rise is being fuelled by DRAM brokers on the so-called "spot market" -- where spare or non-allocated DRAM is sold -- who have hiked prices due to a shortage of memory chips. He said a 64MB chip has risen from $4 to $12 in the last two months.

The volatile DRAM market is only this year recovering from three consecutive years of decline. As demand for memory chips increases so the pressure is felt by manufacturers.

The news is bad for consumers. UK manufacturer Carrera has already upped the price of both its 64MB and 128MB machines. "There will be an added £30 on the 64MB range and £60 on the 128MB machines," according to head of marketing Adrian Thompson. "It is a reaction to the increasing prices of DRAM. Prices have doubled in the last two months," he said.

Analyst Gordon blames a shortage of DRAM for the dramatic price hikes. "Those brokers buying DRAM see a shortage and immediately hike the prices," he said. "There have been no new facilities for two years. There is a healthy demand but manufacturers can't make enough chips." Gordon predicts a "severe shortage" of DRAM by the end of 2000 and until there is increased capacity warned users to get used to high prices. "Prices will increase from now to the middle of next year. Users will be at the mercy of manufacturers," he said.

Vanguard Microelectronics managing director John Byrne agrees, but believes other factors have played a role. "In August there was a powercut in Taiwan which dramatically affected output. Also there is not a lot of product out there and manufacturers want to migrate to 128MB technology. DRAM prices needed to go up to pay for this investment," he said.

Bryne predicts 64MB chip prices will eventually level out at around $15 but sees no early end to the increases. "Every day there seems to be a 5 percent price increase. The market has gone crazy," he said. He anticipates PC manufacturers will be forced to reduce the specification on top-selling machines from 128MB to 64MB. "People have a price point in mind when they buy a PC and that will not change because DRAM prices have gone up," he said.

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