Memory Failures

The world economy may be starting to go into recession, but one big part of the computer industry has been in recession for a couple years already.  

That industry segment is, of course, memory.  Of course, a memory “recession” isn’t quite like more conventional ones.  Until quite recently, it hasn’t been a matter of the world buying less RAM; it’s been a matter of the RAM makers making more RAM than the world is ready to buy (at least at a profitable price).

You can imagine what happens when the world suddenly decides to buy less RAM.  Prices have plummeted even more. 

The RAM industry has been getting prices lower than the full cost (meaning the cash cost of making a memory module plus the cost of the fab equipment to make it) of making it for quite some time.  Now the prices are so low that they don’t even cover the cash cost of making the module.  

What does that mean?  Memory companies keep fabs busy even when they’re getting less than the full cost of their product because doing that means they’ll lose less money than if they shut the whole thing down.  However, when you get less than the cash cost of a product, that means they lose more money keeping the fab open than closed.

So take three guesses what the memory companies are doing.  They’re shutting down fabs and otherwise reducing production, which will reduce production the next few quarters by almost 20%. 

However, the memory companies have been losing so much money for so long that even if cutting production eventually raises prices, they’re going to be in no fiscal shape to thrive or even survive until better days arrive.  DRAMeXchange (from which most of the information in this article was derived) says that the DRAM industry “has entered the final death match” and think several of the manufacturers are likely and indeed need to go for long-term stability.  

What should you make of all this?

Prices will probably continue to drop for the next couple months.  Push will then come to shove, and the smaller fry will begin to drop out.  Since this has always been a feast-or-famine industry, we’ll go from too much to too little, especially since most of the survivors aren’t going to have much money or credit left for new fab equipment.  When that happens, prices will skyrocket.  

But that won’t happen for a few years.  For the next few months, it will be an even better time to load up on RAM.   


About Ed Stroligo 95 Articles
Ed Stroligo was one of the founders of in 1998. He wrote hundreds of editorials analyzing the tech industry and computer hardware. After 10+ years of contributing, Ed retired from writing in 2009.

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