Prices of the most widely used computer-memory chips fell to their lowest level in three weeks after the introduction of better components and lower prices failed to stimulate demand for personal computers.
The spot price of the benchmark 256-megabit, 266-megahertz double-data-rate dynamic random-access memory chip fell to US$3.29 per chip, its lowest since April 1. Over the last 10 days, it has fallen 5.7 percent, according to dramexchange.com, a Taiwan-based marketplace for chipmakers seeking to sell chips that haven't been shipped under contract to large clients.
"The PC industry is trying to lower prices to cause a demand pick up but it seems that it isn't working during this sluggish demand season," the exchange said in its weekly market comment.
Samsung Electronics Co and other makers in the US$16 billion a year industry rely on improvements in processor technology by Intel Corp and lower prices for other components such as liquid-crystal display screens to persuade consumers and companies to trade in old computers for newer, faster models.
Thus far, the introduction of a new version of Intel's Pentium 4 processor and lower LCD screen prices have yet to achieve a surge in demand for new computers, the exchange said.
Chip prices normally peak in the third quarter as computer makers stock up ahead of the year-end holiday season when they sell most of their machines. Prices usually decline steeply in the first quarter before beginning to rise sometime in the second.
Infineon Technologies AG, Europe's No. 2 chipmaker, on Tuesday said it had an eighth consecutive quarterly loss as cost cuts failed to keep pace with a slump in chip prices.
Infineon's chief executive officer, Ulrich Schumacher, said the company's cost of producing benchmark memory chips was about 15 percent more than it could charge in the second quarter.
The average selling price for Infineon's main 256-megabit dynamic random-access memory chips fell to US$4.70 in the second quarter from US$5.80 in the first.
The German company, which got 41 percent of its second-quarter revenue from DRAM chips, cut the cost of production to US$5.40 each from US$6.10, Schumacher said. That cost will fall "close to" US$5 this quarter, he said.
"Further price drops are going to be inevitable, Samsung, Infineon and others are shifting production which will increase supply further," said Sean Choi, an electronics industry analyst at Samsung Securities. "It's low enough right now that they can't even justify costs. Ultimately there is nothing on the demand side that could significantly impact prices in the near time."
Between 10 percent and 20 percent of the millions of chips made every month are sold on the spot market. Most are sold in long-term contracts between producers such as Samsung and Infineon and computer makers such as Dell Computer Corp.
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