The computer memory industry, notorious for roller-coaster swings between bust and boom cycles, has never been this low -- and hopes for a quick rebound are fading. Prices have sunk to the point where memory manufacturers are selling their chips for well below cost and are unable to cut costs deeply enough to squeeze out a profit, despite repeated rounds of layoffs. Hopes for a quick end to the carnage have faded since memory makers have reported several weak quarters. That's good news for consumers, who can add memory for a fraction of last year's prices, but disastrous for manufacturers. To illustrate the extent of the plunge, take a look at pricing for 128-megabit synchronous dynamic random access memory (SDRAM) chips, the most common type of memory used in PCs. A year ago, SDRAM chips averaged $18.40 (about £13) each. Now, the same chip sells for about $1.50 on the spot market. On average, prices on DRAM decline by about 32 percent per year, according to Dataquest. "Relative to cost of production, it is at the lowest point it's ever been," said Andrew Norwood, an analyst with researcher Gartner Group. Still, memory makers and industry analysts hold fast to the idea that the notoriously cyclical memory market will come back around, as it always has. The only variable is when, they say. "Now, it's only a matter of time (and) of sitting tight and not blinking," said Norwood. "Maybe by this time next year, the market will recover." However, a turnaround still seems a distant hope. On Tuesday, analysts at Credit Suisse First Boston lowered their ratings on semiconductor and semiconductor-equipment stocks, and dropped estimates for PC-unit shipments for this year and next year. The brokerage firm projected more bad news for the PC sector, saying unit shipment estimates for 2001 will decline 6 percent instead of the previous estimate of flat growth. In 2002, unit growth should be only 10 percent, instead of a previous prediction of 17 percent. Complicating the possibility of a rebound is the nature of the downturn. Unlike in past cycles, such as in 1995 and 1998, when excess capacity caused manufacturers to cut prices, the latest downturn was created by a slowdown in demand for dynamic random access memory (DRAM), the most common type of memory used in computers and other digital devices. Prompted by last year's abrupt slowdown in the PC market, the memory downturn began last spring, after months of pricing stability. Facing slower sales, DRAM manufacturers used price reductions -- the only tool at their disposal -- to spur sales. A price war erupted and manufacturers began losing money by the bushel, analysts said. With memory manufacturers losing so much money, speculation has mounted that one or more manufacturers might close up shop or sell out to competitors. But analysts believe it's unlikely any of the larger players, including Samsung, Micron Technologies or Hynix Semiconductor (formerly Hyundai), will do so. Korean memory makers Samsung and Hynix, No. 1 and No. 3, respectively, in the memory market, are likely to retain those positions, thanks to huge market share. Both are said to be profitable and well-supported by their country's government. Micron Technology, the No. 2 memory maker, is also a potential money maker, though it has been hit hard of late, posting a fiscal third-quarter loss of $301 million. The top memory makers are in the game for the long haul, but it seems even they have a threshold for pain. VLSI Research, which tracks the semiconductor industry, says that all of the top DRAM producers have trimmed production, hoping to get close to a supply/demand balance. VLSI reported on its Web site that Samsung, Micron and Infineon, among others, have cut production. "Right now, they are hurting bad enough to realise, 'We have to cut wafer starts,'" the number of silicon wafers pushed through assembly lines to make chips, said Risto Puhakka, a vice president at VLSI. Prices have fallen below fixed costs, which figure in for factors such as depreciation and research and development, and are approaching variable costs, which include cost of materials used to make the chips. Any lower, and they'll be near manufacturers' threshold for pain, analysts say. Outside the top three memory makers, it's a different story, and consolidation could become the trend, analysts say. "The obvious targets for some sort of consolidation are Toshiba and Infineon," Norwood said. Toshiba, IBM and Infineon once shared a research and development effort. It is conceivable that Toshiba and Infineon could come together again to share manufacturing, analysts said. NEC has already gone the consolidation route. It recently announced plans to exit the DRAM market, but the company will do so by transferring its manufacturing to Elpida, its joint venture with Hitachi. As a result, overall production capacity is unlikely to be affected. It's possible, but less likely, that manufacturers will exit the market altogether. "It's unlikely that any of the big five will exit. I don't expect any major consolidation," said Steven Przybylski, principal at the Verdande Group, a firm that specialises in semiconductor research. However, "It's possible that one or more of the minor players may drop out completely, combine (with another company) or be acquired." Recent entrants such as Taiwan's WinBond are likely to fall first, analysts say. Several analysts mentioned that Hynix is also a possibility to leave the market, though more distant than some of the Taiwanese vendors, due to its current stature as No. 3 in the market. Instead, companies are more likely to follow Hynix's lead and shutter older factories, which reduces cost and at the same time decreases production. "Production cutbacks... are the only thing that can solve the situation in the short term," Norwood said. Though many companies have cut back on production, according to VLSI Research, it will take some time for those cuts to be felt, due to saturated inventories. "It's going to take a while to burn the inventory off," Puhakka said. Once inventory is burned off and demand returns, then a turnaround can start. "All this will happen one after the other," Puhakka said. "Sooner or later, it all has to turn back to profitability." One way to turn things around is to manufacture more expensive memory forms. Technologies such as double data rate (DDR) memory, championed by Micron, and Rambus DRAM, sold by Samsung, command a higher price and offer fatter profits than standard SDRAM. Samsung officials say they believe that RDRAM and DDR will make up about 25 percent each of its memory mix, with SDRAM accounting for the remaining 50 percent, by the end of the year. Currently, the memory maker's mix is about 20 percent RDRAM, less than 10 percent DDR SDRAM and 70 percent SDRAM, company executives told News.com recently. A resurgence of the PC market is likely to help popularise the new memory technologies, further boosting fortunes for those who last out the downturn. "If they grit it out now, they should rake it in in the future," Dataquest's Norwood said. "That's the allure of the DRAM industry. It's very hard to kick the habit." See Chips Central for the latest headlines on processors and semiconductors. See the Hardware News Section for full coverage. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Chips Central forum Let the editors know what you think in the Mailroom. And read other letters.