With Sale Price Below Cost, RAM Manufacturers Mull Production Cuts

The tendency of DRAM to become cheaper over time is generally considered a good thing—at least, in the consumer market—but evidence suggests prices may have fallen a bit too much. Current manufacturing costs using 40nm technology is about US $1.50 while the selling price for a 2Gb part is currently $1.17 - $1.31. This is less a problem for the top-tier RAM manufacturers who are using 30nm tech, but there's no way for smaller players to quickly migrate to the updated process.

Selling parts below the cost of manufacture is obviously unsustainable over the long term, a fact that has left the DRAM companies contemplating production cuts. Such cuts aren't made lightly; companies have typically negotiated price rates based on purchase volume, have committed to meet certain production targets, and incur certain fixed costs regardless of how much (or how little) product is actually made. As a result, it's potentially cheaper to grit one's teeth through a rough patch rather than make the sorts of changes that slow the product lines.

When we talk about DRAM ICs, we're talking about the individual chips on each stick of RAM, as shown above.

Manufacturers may also be jittery over the impact of a move on the worldwide IT economy. At present, many analysts are cautiously optimistic that demand will tick upwards in the second half of this year; a sharp increase in spot prices (as might be caused by a production cut) could jepoardize that trend. The United States' budget crisis is another potentially huge factor--if the US doesn't resolve the problem and raise the debt ceiling (regardless of how the agreement is reached), economists fear the impact on the world economy could be worse than the fiscal crisis of 2008.

Anyone who needs some memory, however, is in luck. NewEgg lists 8GB kits of DDR3 (that's 2x4GB) starting at $52 for DDR3-1066. DDR3-1333 is currently selling for the same price with DDR3-1600 starting at $64. DDR3-1866 lists at $84.99, with DDR3-2133 at $99. Considering the amount of RAM in question (8GB, in all cases), the cost/GHz ratio from 1066 - 2133 is almost perfectly flat. RAM rated twice as fast as DDR3-1066 is less than twice as expensive.

This doesn't mean DDR3-2133 is a better buy than DDR3-1066--in fact, the performance improvement from faster RAM is small enough that spending money in pursuit of higher memory bandwidth is virtually always a poor choice. Llano's recent launch makes the APU a rare exception to this rule--provided you intend to use the chip's integrated GPU. Nevertheless, if you're one of the rare users who can make use of the bandwidth, high-end RAM is a remarkably good deal.

Those of you who want to squeeze an advantage out of current low prices are advised to try for high-density single-sided DIMMs as opposed to large arrays of double-sided memory. Most CPUs have trouble running a high number of memory banks at high speeds--keeping the number of banks down is important if you want to push speeds upwards, and investing in such RAM now could make sense given historic low prices and the fact that DDR3 will be a constant over the next several generations of Intel and AMD CPUs.