DRAM production reduction talks fail

The World's main memory makers just can't agree to do it

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Some of the world's largest DRAM makers have failed to talk their fellows into a production reduction before the bottom drops out of the memory market completely.

With supply outstripping demand, you can understand why memory companies might well want to limit output, to prevent prices spiralling downward even further. Representatives from the Leading Dramurai met last month to discuss such limitations, but where unable to find common ground, Web site DigiTimes claims.

We can't say we're surprised. Not a few companies are optimistically expecting demand to improve this current quarter and grow further during the last three months of the year. Cutting production now could leave them unable to meet than demand, if it materialises.

A big 'if', that. Intel, for one, is looking to the back-to-school sales period - ie. late August and September - and then the arrival of Windows XP in October to drive up demand for new PCs. It hopes to sell more Pentium 4 processors on the back of that demand, and increased sales of PCs will provide a boost for memory makers too.

Maybe, but unless the demand for new computers is phenomenal - and there's no sign it will be, what with the broader economic downturn and all - it will clearly take some time for prices to rise again. Memory makers could see matters worsen, as PC vendors load up machines with thousands of megabytes of cheap RAM, cutting potential demand further down the upgrade path.

No wonder some analysts are predicting that the memory market is going to get a lot worse before it improves some time around the middle of next year.

And there's the basic unwillingness rivals have to co-operate - and, for that matter, trust each other. The last time this happened, in 1998, everyone except Micron happily cut production, only to see Micron sell rather more DRAM than they did when demand began to increase. Few DRAM makers are willing to risk that again.

Ironically, Micron is one of those companies named as seeking such a production cut earlier this year, according to the DigiTimes report.

Hynix, for one, is cutting production off its own bat, suggesting that it too expects the downturn to last for some time yet. It's betting it can cut production and prepare the ground for more advanced memory products in time for the recovery.

Finally, such acts of co-operation also smack of collusion and price manipulation - allegations the Dramurai are undoubtedly very keen to avoid. ®


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