DRAM will remain cheap for a long time

A continuing glut in DRAM chips is likely to keep prices low for a year or more, analysts have predicted, making it a good time for consumers to add memory to PCs or laptops, but a bad time for chip manufacturers.

The current DRAM downturn – prompted by greater expectations of Windows Vista than it delivered – will probably last more than a year and possibly two, said Simon Woo, memory chip analyst at Merrill Lynch at a recent conference.

"It's longer than expected," he said, comparing it to the DRAM industry crunch of 1997-1998, which lasted nearly two years.

The current glut started in the middle of last year and was caused by DRAM makers building too many new factories in anticipation of strong DRAM demand for PCs armed with Microsoft's Vista OS. The OS requires 1GB of DRAM per PC to run well, compared to just 128MB for Windows XP.

Vista didn't take off quite as DRAM makers had hoped, leaving the market awash in excess chips. Prices have fallen from $6.25 (£3.12) in the middle of last year to $1.92 (96 pence) this week.

Such huge price declines in the DRAM market caused Gartner to pare its global chip revenue growth forecasts for this year to just 3.4 percent, from a previous estimate of 6.2 percent.

Most analysts believe prices will reach their lowest point in the second quarter of the year, because that's when PC demand is seasonally weakest.

"We expect DRAM prices to fall another 10 percent in the second quarter of 2008 as PC DRAM content growth slows and inventory rebuilding ends," said Matt Evans, memory chip analyst at CLSA, in a report. He expects DRAM makers to cut spending on new production lines, which could spur a price recovery of as much as 10 percent in the third quarter.

Do Hoon Lee, memory chip analyst at Macquarie Securities, warns that second quarter DRAM price declines could be far worse than expected if DRAM makers unload inventory into the market. Macquarie expects many DRAM makers to put the construction of new factories on hold, a move that could boost DRAM prices a bit.

But DRAM makers cannot afford to cut back too much on production, partly because of the global credit crunch, and partly through fear of losing market share. The credit crunch means it's harder for companies to find new funding, so DRAM makers need to keep selling chips - even at cut-rate prices - to ensure a steady flow of cash to fund continuing operations.

The heavy cost of building new DRAM factories is also an issue. Such plants can cost up to $3 billion (£.15 billion) each, and companies normally run them 24 hours per day to get as much out of them as they can.

Intel's Silverthorne Chip Could Power Apple's Future

Intel's new Silverthorne chip is ideal for ultra-portable laptops like Apple, Inc.'s MacBook Air, but Intel may be laying the foundation for future Apple processors. Intel gave a hint of Apple's future in one of 14 papers it will present at the International Solid-State Circuit Conference in San Francisco.
Just because a paper is technical doesn't mean marketing wasn't involved. A good example is Intel's presentation Monday at the International Solid-State Circuit Conference in San Francisco on its upcoming Silverthorne mobile processor. The title: "A Sub-1W to 2W Low-Power IA Processor for Mobile Internet Devices in 45nm High-ÊMetal-Gate CMOS."
Sounds geeky, but consider the phrase "mobile Internet devices." That appears to align with Apple's vision of the iPhone and iPod Touch as "the first mainstream Wi-Fi mobile platform, running all kinds of mobile applications."
But while Silverthorne draws 10 to 15 times less power than Intel's Centrino laptop processor and is "easily the lowest-power laptop-style processor that Intel has produced," Charles King, principal analyst for Pund-IT, said in a telephone interview that the new chip is far better suited to ultra-portable laptop computers than handheld devices.

Air, Not iPhone

So for Apple, one of several manufacturers committed to adopting Silverthorne, think MacBook Air, not iPhone, King said.
Indeed, Intel is aiming the first version of Silverthorne at the ultra-portable market -- "potentially a very interesting market, but one that's still evolving," King said. "Hats off to Intel. It's a very interesting development, potentially very valuable" for the next generation of mobile devices.
The problem is that price and battery constraints have made ultra-portables of limited interest for most consumers. And while Silverthorne may dramatically reduce a laptop's power consumption, it's just part of the problem.
"Processor power consumption pales in comparison to display and hard-drive power consumption," King said. Silverthorne "is not a magic bullet," he added.

Foundation for Smartphones

That's not to say that Intel won't deliver smaller and more powerful versions. "Maybe Silverthorne is a step toward a hybrid device that would blend mobile-phone capabilities with tablet or laptop capabilities," King said.
Exactly the point, Intel says. Silverthorne is not just a chip for new laptops, it's an architecture that gets Intel on track to compete in the smartphone market.
"The low-power microarchitecture we're going to be rolling out next week is establishing a foundation that will spawn multiple processors in different segments," Pankaj Kedia, a director at Intel, told Computerworld. "We believe mobile Internet devices is a big market -- a high-growth market."
He added, "We think more and more consumers will want to carry the Internet with them in their pocket. Silverthorne will be the heartbeat of this category. From a growth perspective, Silverthorne is very important."
So Apple's interest in Silverthorne is intriguing. The iPhone, like other smart phones, uses an architecture from ARM. If the Silverthorne platform can eventually compete with that architecture, Intel may be able to get much more business from Apple.