The DRAM (dynamic random access memory) chip market will be worth 55.5 per cent less this year than last due to falling chip prices, according to a study published by Dataquest yesterday.

Worldwide DRAM revenue is projected to fall from $31.5 billion in 2000, to $14 billion in 2001, claims the study's author, Andrew Norwood, a senior analyst for the UK division of Dataquest.

He claims: "It all comes down to pricing, and this year DRAM prices have collapsed." DRAM prices have declined by about 80 per cent in the past 12 months, he added.

Stock build-up DRAM chips are used as the main memory inside personal computers, and their prices have been falling since the middle of last year, when PC sales started slowing down and inventories began to build up at the chip makers.

Norwood says: "The industry always suffers boom and busts, with two types of busts: over-capacity and lack of demand. While the DRAM market has been experiencing difficulties with over-capacity for the last few years, this year the problem has been compounded with a serious lack of demand in the PC market. This is significant since the PC market accounts for 65 per cent of the DRAM market."

Earnings down All of the major players in the market, such as LG Electronics, Hynix Semiconductor, Micron Technology, Samsung Electronics, NEC and Rambus, have reported significantly lower earnings for the year.

In February, the spot price for benchmark 128Mb DRAM chips, was approximately $4.50, according to memory chip market data provider Independent Commodity Information Services.

This week, the spot price for the 128Mb DRAM chips dipped below the $2 mark, with contract pricing falling below the cost of production for most manufactures to under $3 per chip.