Channel stays calm amid DRAM price spike

Channel wary of taking on too much stock as DRAM prices spike in the wake of Elpida's bankruptcy

System builders have been advised not to bulk-buy DRAM despite a recent price spike brought on by the bankruptcy of Elpida.

Elpida, which is the world's third-largest DRAM manufacturer, filed for bankruptcy protection earlier this week as the after-effects of the Japanese earthquake, along with falling demand for PCs, caught up with the firm.

According to price comparison site Idealo, the average price of the 20 top-selling DDR3 RAM sticks from manufacturers including Kingston, Corsair, HP and G.Skill spiked by 20 per cent between Monday and Wednesday - more about the spike can be found here.

But in a sign that retailers and system builders don't think Elpida's bankruptcy will have the impact first feared, prices dropped back slightly yesterday, lowering the net increase to 14.2 per cent.

Steve Bland, sales director of Kingston, Muskin and Samsung distributor KMS Components, advised system builders not to bulk-buy, predicting that prices will stay put unless evidence of a shortage emerges.

"It is the wrong time for vendors to put pricing up as the demand is not there," he said.

"With the hard drive shortage, everyone panic-bought. But at the higher price point, demand dropped by 50-60 per cent. If that hadn't happened, you might now have seen people buying large amounts of stock, but they have had their fingers burnt already."

He added: "I would only advise people to buy what they need, not to make money."

Dave Stevinson, sales director of Patriot, G.Skill and Eudar distributor VIP Computers (pictured), said prices have generally risen 20-25 per cent this week.

"We normally expect people to buy 50-100 units but we have seen some panic-buying of up to 1,000 units," he said. "But we expect it to be a temporary blip and for things to peter out over the next two to three months."

Bernd Dombrowsky, EMEA sales and product director at Kingston, said he expects the average price of 4GB DDR3 products to hover around $20-21 for the next couple of weeks.

"At the moment, there is no clear picture that the market will either continue to increase sharply or fall back. It will take a couple of weeks before it shows any clear direction," he said.

Dombrowsky played down the impact a price increase could have on the channel.

"Memory prices are so low that they had to go up at some point; there just had to be a little trigger like a bankruptcy to set off the trend," he said. "Maybe it came a little earlier than anticipated."

In Q3, Elpida held a 12.1 per cent of a global DRAM market dominated by Samsung, according to figures from IHS iSuppli. The Japan-based firm is labouring under liabilities of 448bn yen ($5.5 billion), according to a filing with Japan's finance ministry.

DRAM prices have dropped off a cliff in recent years and Elpida, which was formed in 1999 through the merger of NEC and Hitachi's memory businesses, lacked the clout to stay afloat.

"An average 4GB DDR3 product, which is probably the most popular, is now £9-11, which is crazy," said Bland.

"The larger guys [like Samsung] are able to last a lot longer in a price war. Elpida won't be the last casualty in the next 12-24 months. If you only work in one sector and it turns into a loss-making sector, it is going to be difficult to survive."

James Bird, chief esecutive of system builder Stone Group, said: "It is likely that prices will rise in the short term but it is difficult to predict the long term effect on the market at this stage.

"Stone has strong relationships with several memory suppliers which will enable us to successfully mitigate any potential disruption to our customers. We will continue to monitor the market on a daily basis until the situation becomes clear."