RAM Prices May Climb in 2006

DRAM prices have been on the decline fro the past couple of years, but that trend may start to change in 2006, according to a report from research firm iSuppli. The increase could potentially drive production costs for Apple up. Apple uses DRAM in its laptop and desktop computers.

Production growth of DRAM is on the decline, and is expected to rise by about 52 percent in 2006, compared with a growth rate of 62 percent for 2005. Prices in the fourth quarter of 2005 were down, too. prices for 256Mbit and 512Mbit DDR-SDRAM chips dropped by about 20 percent.

The lower production rate of chips, along with a shift by manufacturers to the more lucrative NAND-Flash memory, as used in the iPod nano and shuffle, may start to nudge DRAM prices back up. Several DRAM suppliers, including Samsung and Hynix, have already started transitioning factories over for NAND production.

The overall market for DRAM, however, may not fare so well in 2006. Global sales are expected to drop 5.1 percent to US$23.97 billion, compared to $25.25 billion in 2005. 2007 should be a better year for DRAM manufactures, with an expected $26.8 billion in sales.

Manufacturers have been keeping DRAM prices artificially low, even selling the memory below cost in some cases, setting a precedent that Apple may be able to take advantage of. Apple may be able to use its buying power in the NAND market to leverage suppliers to continue to keep their DRAM prices down.