The falling prices of computer memory chips is hurting manufacturers, according to analysts.

The price for 64MB PC100 SDRAM (synchronous dynamic random access memory) chips has fallen around 15 per cent in the last seven days, according to information from research company Independent Commodity Information Services (ICIS).

In the Asian market, 64M bit SDRAM chips are now trading at around the cost of manufacturing. The same chips are trading at slightly higher levels in Europe and North America, but profits are razor thin, according to ICIS.

Volatile market Paul Gladstone, managing director of UK memory vendor Mr Memory, said: "The market is very volatile, and favouring the consumer – memory is at it's lowest prices since 1997." Gladstone believes that political uncertainty in the US could also affect memory prices, as the dollar becomes a more volatile currency. He added: "The best time to upgrade memory is now."

The price slide began globally in July, after 64Mbit SDRAM devices hit a recent high, and just as major DRAM makers were forecasting shortages of the chips towards the end of the year. Falling prices began to affect the UK market in early September, said Gladstone.

Jim Sogas, vice president of sales and marketing for US firm Elpida Memory, said: "We had this continuous threat for the past six months that supply is going to be tight for a long time. It was definitely tight for the second and third quarters, but, I think we projected that so much that some customers started hoarding parts. When they realized they didn't need to, they started burning them off."

Cautious Christmas As well as a build-up of inventories, a slump in personal computer sales has reduced demand – companies have traditionally placed extra orders before Christmas to accommodate increased demand, but they're being more cautious this year.

Erich Ross, vice president of semiconductor research at Thomas Weisel partners, said: "Orders haven't come in yet. Computer manufacturers are nervous about the potential for weakened demand."

Sogas believes an end to the slide might not come for at least three months, so manufacturers might have to endure slimmer and slimmer margins.

Meanwhile, some major memory distributors are going to the wall. Gladstone said: "It's a rough time for distributors, but it is the best time to buy for consumers."