Faced with a retracting PC market that has decimated DRAM prices, Samsung Electronics Co. Ltd. last week showed the way to a potentially lucrative alternative by signing a deal to furnish low-power versions of the chips to cell phone giant Nokia Corp.

Though the companies disclosed no details of the contract to supply DRAM for Nokia's next-generation wireless handsets, the deal makes Samsung among the first memory makers out of the gate in a new market estimated to reach more than a billion units annually by 2004.

The other Big Five DRAM vendors -- Elpida Memory, Hynix Semiconductor, Infineon Technologies, and Micron Technology --all have low-power DRAM at the ready and are vying for contracts from cell phone OEMs.

The emerging market is proving attractive as a means to create demand to absorb some of the oversupply afflicting DRAM vendors. Suppliers are also hopeful they can improve their margins by catching the trend early, partially offsetting losses in the PC market where DRAM is selling at or below manufacturing cost.

What's driving OEMs to turn to DRAM for their cell phones? The need for sufficient storage capacity to handle the huge volume of images and data coming into next-generation Internet-enabled handsets. Cell phones equipped with interim 2.5G service generally have enough extra bandwidth to provide adequate Internet service, but when carriers launch 3G wireless service in the next few years, phones will be expected to process much more information, including streaming video.

That in turn will require memory densities far in excess of what SRAM, which is used to store data in most cell phones today, will be able to offer, according to analysts.

Though a cell phone uses far fewer DRAM chips than a PC, the market's unit volume is several times larger. This year alone, 175 million low-power DRAM chips will be shipped to the handset sector, accounting for 4.7% of the total DRAM market, according to Sherry Garber, an analyst at Semico Research Corp., Phoenix. Garber expects that number to increase to 1.17 billion units, or 18% of the market, in 2004, and 2 billion units, or 28%, in 2005.

With new applications come new variables. Unlike commodity PC memory, for example, low-power DRAM may become more customized to meet the different requirements of handset OEMs, according to Mueez-Ud Deen, director of DRAM marketing at Samsung Semiconductor Inc., San Jose. DRAM in wireless handset applications "will create its own market dynamics," Deen said.

Mike Despotes, president of Elpida Memory Inc., said recently that cell phones may be the catalyst for a wave of application-specific DRAMs that will fragment the market.

Different packaging needs alone will lead to more customized memory chips, according to Mike Sadler, vice president of the networking and communications group at Micron Technology Inc., Boise, Idaho.

"Handsets need the smallest and most compact form factor possible, and DRAM manufacturers are coming up with their own unique packaging to meet these requirements," Sadler said.

Samsung, for instance, is developing a side-by-side die combination in a single package. JEDEC is working on a standard low-power DRAM specification, although different packaging designs are expected to lead to customized versions of even this standard chip.

"OEMs will try to differentiate their handsets, and no one type of DRAM will dominate the market," Deen said. "Chip packaging is critical for OEMs, where even a 0.1in. thinner handset may be a selling point."

Micron is working with other chip makers to accommodate DRAM in the same package with a DSP or cellular chipset. Sadler didn't identify Micron's partners, but said the first multichip package is expected in the next six months or so. Micron is also developing an embedded DSP/DRAM to reduce the package footprint even further. The low-power device is already starting to appear in the nonwireless PDA market, as vendors start to upgrade from EDO DRAM.

The market for low-power DRAM in wireless handsets will ramp up in mid-2002 with voltage levels of 3.5 and 2.5V, according to Sadler. Samsung manufactures a 1.8V DRAM, but Deen said most cell phone makers will probably opt for the 2.5V chip because other components in the handset operate at this voltage.