According to the news today it’s a great time to buy DRAM. Dynamic RAM (DRAM) has dropped to its lowest price of the year this week and industry analysts predict the price may go even lower. 

The contract price of the most widely used DRAM chips, 512MB DDR2 (double data rate, second generation) chips running at 667MHz, dropped 12.5% to $1.75 each as of September 20th, a new price low so far this year.

The price drop has been attributed to price competition and an oversupply of DRAM as a result of anticipated (but thus far unfulfilled) demand for Windows Vista, which requires more DRAM. 

DRAM prices had been fairly stable over the past couple of years, but there has been an emphasis on building new factories and ramping up production, which has contributed to an oversupply of DRAM. 

Manufacturers often create their own woes by putting more emphasis on winning market share than on making a profit, and when there is oversupply they are forced to dump their inventory at sometimes bargain basement prices.

According to the Semiconductor Industry Association, prices for DRAM chips fell almost 40% during the first six months of 2007 compared to prices during the same period in 2006. 

Contract DRAM prices for DDR2-667 chips have plunged  over 70% so far this year to land at this week’s price. Contract prices for DRAM are usually renegotiated between PC vendors and DRAM manufacturers every 2 weeks. About 80% of the DRAM is contracted for, with the remaining 20% sold on the spot market as a commodity.

When DRAM dropped dramatically in May of this year some manufacturers held onto their DRAM hoping to recoup some of their losses. With today’s precipitous decline those hoping to regain losses will likely dump their remaining existing inventories to prevent taking a further hit on its value.

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