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DRAM Prices Dropping Sooner Than Expected

Research firm iSuppli says it now appears September will mark the start of declining prices that would continue in the fourth quarter.
Prices for DRAM chips are expected to fall in September, a month sooner than forecast as suppliers and distributors continue to work off a glut of inventory, a market researcher said Tuesday.

ISuppli had previously predicted that prices would fall in October, following a third quarter of relative strength that succeeded severe erosion in the second quarter. The research firm, however, said it now appeared September would mark the start of declining prices that would continue in the fourth quarter.

The bad news for suppliers of the computer memory is due to an inventory glut, rising prices, and falling supply of LCD panels, which cut into the budget for memory in some PCs. ISuppli now believes there's the possibility of double-digit sequential price declines in the fourth quarter, erasing any gains suppliers may have experienced in the third quarter.

Amid signs of improvement in pricing, iSuppli in July upgraded its rating of near-term market conditions for DRAM suppliers to "neutral," up from "negative." A reduction in production among DRAM makers had appeared to bring supply and demand back into balance.

Suppliers have started to cut production, which is expected to play an important long-term role in strengthening the DRAM market, iSuppli said. The global annual bit growth next year is projected to amount to less than 60%, compared with the 97% bit growth expected this year.

Because suppliers are cutting back, iSuppli is holding firm on its "neutral" market rating. While the DRAM market this year is expected to grow by less than 2% in terms of revenue, it's forecast to rise by 17.5% next year.