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DRAM memory market observers report about gradual declines in memory pricing throughout the past few weeks, according to Dow Jones Newswires. Nevertheless, analysts believe there is nothing to worry about for memory makers – cost reduction of DRAM manufacturing is outpacing the speed of price declines, therefore, producers still see some profit.

Spot price of 256Mb DDR SDRAM chips at 333MHz clock-speed plummeted from $4.48 to $4.35 in less than two weeks, according to DRAMeXchange. Contract prices for the same variety of DRAM have fallen slightly for the second consecutive two-week period, to a range from $4.81 to $5.19, from a range of $4.88 to $5.19.

The declines in pricing are not that serious at this time, but the trend may still be quite dangerous for DRAM companies. Within the last four years the memory industry lost billions of US dollars on massive price drops and price wars.

It worth to note that the DRAM pricing is not a totally independent value, but is a result of the most-recent actions performed by memory makers. Thus, in case the vast majority of memory makers are cautions enough in their price decreasing, the pricing is not likely to fall. Customers of memory makers are generally aware about the suitable pricing for DRAM manufacturers and do not typically intend to cause memory prices to slash dramatically, as they know that ever decline is followed by an increase.

Given that DRAM production costs come down on average about 33% per year, or around 9% per quarter, if the prices are down by lower margin, memory makers are still in green, according to Andrew Norwood, an analyst for Gartner Dataquest. Furthermore, as large PC industry giants, such as HP and Dell, squeeze out smaller PC companies, the spot memory market shrinks and the whole memory market becomes more stable.

The amount of DDR DRAM chips sold on the spot market shrank to 22% in October 2003, compared with 36% in January this year; while 78% of all DRAM was sold by contract in October, versus 64% in January, according to DRAMeXchange.

All-in-all, in spite of a rather dangerous trend, the outlook for DRAM producers is still positive. On the other hand, relatively high pricing of DRAM products is not that positive for end-users demanding more memory at this time.

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