Against the background of currently extreme low DRAM, pricing levels, chip makers are already at the verge of losing money, DRAMeXchange observes. Removal of excess inventory drove prices down recently both in spot markets as well as in contract markets to new lows, with DDR2 512Mb 667MHz as the current market reference being sold for around $2.57 in spot markets. By midyear, the bottom will be hit and prices will rise again, driven by PC sales which traditionally are stronger in the second half of the year, DRAMeXchange predicts.

This decline was much bigger than the market watchers originally expected. Besides seasonal reasons, the drop was caused by what the analysts calls a huge imbalance in the demand and supply chain: As their production capacities continue to increase, DRAM vendors have been forced to sell their chips at extremely low prices, with their capacities continue to increase.

Now hard-pressed DRAM manufacturers are trying to drive down their costs - or to avoid mainstream markets which are especially prone to price pressure. For example, Qimonda focuses more and more on graphics DRAM markets. The same at Micron, who owns relatively many less-productive 8-inch fabs; Micron is introducing chips with special specifications in order to avoid the DRAM commodity market. In contrast, Taiwan-based manufacturers still are boosting the capacity of their 12-inch fabs - with the obvious effect of again increasing price pressure.