RAM prices finally heading north

By Guy Kewney, live from Singapore

Computer memory prices went down in August. Anybody who breathed a sigh of relief can adopt their normal anxious pose, because they're going up again. The situation was described as "unprecedented" by one local expert out here, as chips went from glut to shortage almost overnight.

The cause is not yet generally accepted. But it seems that embarrassing production failures, not the action by US government against "dumping" of memory chips by Far Eastern suppliers, are currently seen as the major cause of the switch around.

Rumours of major problems with one Korean supplier's EDO RAM has apparently been confirmed, with IBM having to recall some models using those chips. And it appears that Texas Instruments, expected to be able to cash in on the growing EDO market, has also hit a shortfall, with buyers hinting at unspecified incompatibility problems with some parts.

At this point, in a normal year, the big PC suppliers would not be badly affected, because they'd draw on their stocks of unused chips. But the rapid fall in memory prices over June through August made it suicidal to try to stockpile RAM, and everybody seems to have run them down to the lowest ever levels. Suddenly, it is wise to have bought two weeks ago, and essential to re-order right away.

This would matter less if earlier, gloomy forecasts about PC sales had proved correct. In fact, it is starting to look as if demand is well back up on last year's predictions of downturn, and of course this means huge demand for new RAM supplies. And prices have bounced back as a result; trade price examples quoted over a two-week period were $30 for an 8Mb SIMM a fortnight ago and $38 this week.

To describe the market as "confused" would be to understate the near-panic, as the DRAM makers switch around their plans from large-scale layoffs and cancellation of production plant, to "business as usual" in the face of frantic buying frenzy.

Quite what will happen to European and US attempts to discriminate against Korean memory makers is unclear; it's hard to see the giant bureaucracies being able to switch direction with the suddenness of the market turnaround. But if they persist and current price trends continue, they will find themselves asking suppliers who have raised prices to stop cutting them.

And of course, the news for Microsoft and Intel, pushing the Pentium Pro and Windows NT - requiring 32Mb for efficient operation - is going to be doubly unwelcome. The Pentium Pro doesn't shine at running Windows 95 use of the large amount of 16-bit code in that OS; but if memory becomes tight, as it may do if PC numbers rise as predicted, then the market will have to emphasise the Pentium and Windows 95 again.