Samsung, Micron Electronics, Elpida Memory and other chipmakers are cranking up the production of a faster version of computer memory, called DDR2 SDRAM, that will start to become available in the next few weeks.
DDR2 will be able to handle data at a substantially faster rate than products with DDR, the most common type of PC memory, while using less energy.
DDR2 will probably sell for a healthy premium for nearly two years, giving manufacturers time to realise profits in a tech market plagued by a vicious boom-and-bust cycle. Memory prices have been known to plunge by 75 percent or surge three-fold in just months.
So far, 2004 appears to be headed for the surge category, which could be bad news for consumers, who have become accustomed in recent years to steadily falling prices.
According to research company Gartner, prices will rise by 23.1 percent during the year, while the amount of memory cells churned out will grow by 52 percent to 164 billion megabytes. Overall, revenue for the industry is expected to grow from $17.5bn (£9.7bn) in 2003 to $25.3bn in 2004.
DDR2 will help drive the gains, with the new memory chips accounting for 22 percent of the memory output in the fourth quarter and 50 percent of the output at the end of 2005, according to Gartner.
In the past month, prices for the older DDR technology have soared: 256-megabit DDR chips went from $4 in the first week of March to $6 this week. Part of the reason is that PC makers have increased their orders to insulate themselves from fears of shortages later this year, said Nam Hyung Kim, principal analyst at iSuppli. (The prices reflect the cost of individual chips, which are classified by megabits and sold to manufacturers. Memory modules, which are classified by size in megabytes and what consumers buy, track chip prices. DDR modules of 256MB currently cost about $70 to $80.)
"All of the major DRAM suppliers are making money at the moment," Kim said. "The DRAM market has gone crazy."
The shift to DDR2, however, will coincide with a manufacturing overhaul that will require producers to smooth the kinks out of new factories, manufacturing processes, and changes to packaging and chip design. A slip anywhere along the line could cause manufacturing yields -- and potential profits -- to evaporate.
