Already weakened by collapsing prices, DRAM manufacturers face even lower sales in 2002, according to analysts. The industry is expected to suffer a wave of consolidation as a result, predicts Dataquest.

Worldwide sales are expected to hit $10.5 billion this year - a $21 billion drop from the $31.5 billion estimated for 2000. The market is expected to contract further, hitting $8.5 billion next year, the analysts claim.

Many DRAM manufacturers are unable to profit from their business, because of the low prices prevalent in the market. Dataquest analyst Andrew Norwood predicted in the statement that the companies will continue to lose money until the end of next year, and that this situation may lead to the failure of some companies.

On the brink South Korea's Hynix Semiconductor, one of the world's largest manufacturers of DRAM chips, is already on the verge of bankruptcy. It has rescheduled debt repayments several times and is currently shedding non-core business units in an attempt to stay afloat. Industry insiders have confirmed that many of the Taiwanese and Chinese manufacturers are also encountering severe difficulties maintaining their operations in the current market conditions.

Breaking down the market for 2000, Samsung Electronics ranked number one among DRAM makers, with a 21.1 per cent market share, said Dataquest. Micron Technology was in second place with an 18.9 per cent share, followed by Hyundai Electronics - now called Hynix Semiconductor - at 17.2 per cent.

Dataquest's warning came as spot prices for DRAM chips continued to fall on world markets. In Asia, the spot price for 128MB PC133 DRAM chips, a component now becoming standard in many PCs, stood at around $1.00 on Wednesday, according to market pricing services. Three months ago the same chips were trading for around $1.65 and at the beginning of the year cost around $5.40 per chip.

The upside of this situation for consumers is that computer memory is now very cheap and loading a machine up with 256MB of memory costs a fraction of what it did a year ago. The failure of a major memory chip maker, should it happen, would likely send prices upwards because its closure would mean lower production of chips.