Online clearing houses have reported nearly an 18 percent plunge in two weeks on DRAM, bringing prices to a new low.

DRAM contracts for the last half of September fell to $1.44 per physical chip. DRAM contracts are negotiated between the chip vendors and the PC vendors – which make up nearly three-quarters of the entire DRAM market currently.

Mainstream chips such as 1 GB DDR2 DRAM that run at 667 MHz have been on the super low for over a year now. The problem is that DRAM makers built too many factories and pumped them out at near alarming rates in competition with each other. Hopes of people transitioning to Vista was part of it as well and the end result was the prices we see now. Their flop was our fortune, and still is for some consumers.

Consumers wishing to upgrade current systems can find extra memory for very little cost. The same also applies to consumers purchasing new system based on DDR2 – The vendor usually adds in RAM upgrades for next to nothing in favor of just moving the stock.

The slump in the DRAM market has been bad for suppliers however. Current prices per chip are below the cost of production for many vendors. Recent earnings conferences held by DRAM makers all indicated big losses. The only company remaining somewhat profitable was Samsung. There is a lot of speculation that because of the current state of the DRAM market we could very well end up seeing buy-outs among weaker rivals.

One analyst, Uche Orji at investment bank UBS believes that Micron Technology maybe in talks to acquire Qimonda in Germany. Other companies are announcing production cuts.

So what does all this mean for you, if you haven’t picked it out already? More price cuts, prices are dropping again and you should see the effects shortly with both online and offline retailers.

Source : Tom's Hardware