SAN JOSE, Calif. -- A spike in the cost of memory chips could send computer prices upward -- just in time for the holiday shopping season.
Manufacturers are beginning to pass on the higher costs of the memory chips, known as RAM, to consumers, who have been seeking more and more powerful chips as they go after faster computers with the best graphics.Sixty-four megabytes of RAM -- a typical amount of memory in a $1,000 computer -- once sold for as low as $40. Now the same memory is retailing for about $100 and could reach $150 next month, analysts said Thursday.
"About 7 percent of the cost of desktop PCs is memory, and when a manufacturer sees that suddenly double, you can bet they're going to react," said Steve Cullen, principal memory analyst at In-Stat market research. "Those days when (memory chip) prices were coming down, down, down are over."
RAM is important to a computer because it stores information that a processor might need at another point, allowing a user and the computer to more rapidly switch back and forth between tasks for everything from screen savers to spreadsheets to games. Even the fastest processors are slow at performing multiple tasks without adequate RAM.
Supplies in the past several months have been constrained for a variety of reasons.
Manufacturers shuttered or sharply reduced production in many factories in the Far East last year after a 3 1/2-year glut caused prices to fall to a record low, and new supplies of super-fast RAM chips with double the current greatest speed have been slowed by glitches.
The most recent blow to the industry came with the 7.6 magnitude earthquake in Taiwan last month that either destroyed factories or threw sophisticated machines out of calibration, said analyst Sherry Garber at Semico Research Corp. Taiwan produces 12 percent to 15 percent of the world's RAM chips.
Manufacturers, meanwhile, have been competing in the cutthroat industry by offering consumers computers with more and more memory at lower and lower prices.
"So you've gone from a situation where the supply-and-demand scenario was just about in balance to one where as much as 15 percent of world production is lost, at least for a week," said Cullen. "That means computers will either be on store shelves with less memory at the same prices, add-on memory will cost more -- if it's even available -- or overall computer prices will be higher."
"The message for the consumer is that if they're looking at buying a low-cost machine, they'd better buy it pretty darn quick," Enderle said.