RAM: Time to Stock Up!
Oct 28 '00 (Updated Nov 19 '00)
RAM is something of an anomaly when it comes to PC hardware. Everyone knows that with the blinding pace of advancement in computer technology, the price of hardware is constantly decreasing, sometimes rapidly, as new generations of hardware are released. As a result, the "best time to buy" is always "next month", if you get my drift. But RAM (a.k.a. "memory") is the one exception.
Boom-Bust Economics
The entire semiconductor market (i.e. computer chips, including RAM) has always been highly cyclical, with shortages followed by oversupply, followed by shortages, followed by oversupply, etc... Kind of like the US economy, in a sense. You've got situations like early this year, when all kinds of chips were in short supply: CPU shortages due to undercapacity and Intel manufacturing problems; flash memory shortages due to incredible demand for cell phones and PDA's (ex. Palm Pilots); and low supplies of RAM due to... well, more on that later. Then you have the opposite, where manufacturers have increased their capacity so much, it seems like the entire world has been flooded with chips everywhere you look, and the manufacturers are practically looking to give them away.
It sounds pretty strange, I know. How can chip companies continue to mis-estimate the demand year-after-year, without finally getting it "just-right"? Wouldn't they finally realize that they keep "over-doing it", and just supply the world with a steady supply of chips to prevent both the gluts and the shortages? Well there are many reasons it isn't that way, some of them quite complex, but it essentially all boils down to one thing: extra semiconductor factories ("fabs") can take several years and billions of dollars to build. As a result, companies need to estimate demand several years in advance, or they risk missing the boat completely. Even less drastic ways of increasing capacity, such as buying extra manufacturing equipment, can cost millions and take months to complete. And by the time that extra capacity is up-and-running, the actual demand may be nothing like what they projected.
However, even with the "boom-bust" cycles of semiconductors in general, almost all computer hardware still goes down in price over time, even during the "shortages". For example, even throughout the most serious Pentium III shortages late last year, prices for CPU's still continued to drop steadily. But RAM takes that cyclical nature to an extreme.
The RAM Rollercoaster Ride
About a year and a half ago, RAM prices basically fell through the floor. We were looking at one of the most severe gluts in history, mainly due to RAM makers over-reacting to high demand. Around August 1999, finding 128 megs of SDRAM for only $40 was not uncommon, which was about 1/3 of what RAM cost just a few months earlier. However, that September an earthquake measuring 7.6 on the Richter scale rocked Taiwan, temporarily crippling the the world's largest supplier of semiconductors and triggering a series of events that caused the most rapid increase in RAM prices in history. Within a few months, that same 128 megs of RAM sold for $200-250, over a five-fold increase in price.
Since that huge spike in late '99, we've already gone through a cycle-and-a-half. Prices went back down to normal around March 2000 (at which time I bought 128 megs of PC100 RAM for only $55), only to spike again, almost tripling by mid-summer.
So what's the bottom line?
By now you're probably thinking, "Well vicwang, that's really very interesting and all (not), but when's the next glut going to happen so I can stock up while it's cheap?" Well you're pretty much looking at it. A quick Pricewatch check (www.pricewatch.com) shows 128 megs of PC133 SDRAM for only $55, and that may drop even further within the next few weeks (UPDATE: as of today, 11/15, 128 megs of PC133 has dropped to $45). But it won't stay that low for long. I was saying it last March right before the spike, and I'm saying it now: if you're in the market for RAM, now's the time to get it. Reasons include:
1) The "spot-price" of RAM, the price at which manufacturers sell RAM to resellers, hit an all-time low on Friday. To quote a recent article from The Register (www.theregister.co.uk):
"Spot prices of the benchmark 64Mb DRAM fell through the floor today, hitting a record low in Asia, of $4 per PC100-flavoured chip, the Korea Herald reports. This is getting perilously close to break-even territory, and if prices don't rise soon, Korean DRAM makers will consider cutting back on production, in order to shore up next year's price projections, the newspaper says."
Note that last sentence, which pretty much says it all. But as if that weren't enough reason to buy now...
2) The Christmas selling season is upon us, after several months of relatively low PC demand throughout the summer. Yet another factor that could lead to a RAM spike by year's end.
3) Regular PC100 and PC133 SDRAM, the standard RAM for the past several years, is nearing the end of its lifespan. AMD Athlon systems will soon be released supporting DDR (double-data rate) SDRAM, which is twice as fast as current RAM technology. Also, much to the chagrin of computer owners everywhere, Rambus (RDRAM) will start going into increased production late this year due to the upcoming release of the Pentium 4. "Okay great, that means they'll be holding a firesale on the old SDRAM, right?" Probably not. The effect will likely be the opposite, with manufacturing capacity being used to make DDR and RDRAM instead of "regular" RAM. That means fewer SDRAM chips made, and higher prices as a result.
If you read my earlier Epinion on RAM, you may be wondering why I seem to have done a complete 180 in my philosophy. Just two weeks ago I was writing about how more RAM is not necessarily better, and debunking the notion that we should stock up on RAM just for the heck of it. Well regardless of how it may seem from reading this, that still holds. No matter how cheap RAM becomes, buying more RAM than you could ever possibly use is still a waste of money (just not as much a waste as it would have been three months ago). For the short term, however, if you've been looking to splurge on that extra 128 megs of PC133 RAM, now is the time to do it.
UPDATE 11/17: Better hurry--as of today, it looks like RAM prices have "bottomed out" (with $44 being the cheapest Pricewatch listing for 128 MB of PC133 RAM), and it's only a matter of time before they rise again. To quote an 11/17 story from the Register entitled "SDRAM prices pull out of nosedive" (keep in mind the costs cited in the article are wholesale costs):
"SDRAM pricing seems to have stabilised after months of free fall, with the benchmark 8 x 8 PC100 64Mb SDRAM staying at $3.85 ($4.08 per unit) in the US, while the value of 8 x 8 PC133 64Mb SDRAMs remained at $3.90 (4.13 per chip)".
The full story can be found here:
http://www.theregister.co.uk/content/1/14814.html
Thanks for reading,
-vicwang
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Epinions.com ID:
vicwang
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Member: Vic Wang
Location: Texas
Reviews written: 45
Trusted by: 217 members
About Me:
Systems Analyst and all-around computer guru who's always keeping up with the latest technology.
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