The price of the most commonly used DRAM chips have slumped to all time lows in the spot market.

The average spot price of the mainstream memory chip, 256Mbit double data rate DRAM that runs at 400MHz, or DDR-400, fell to US$2.03 in early trading on Friday, according to DRAMeXchange, an online clearinghouse for the chips. The current price is just half of what the chips fetched at the beginning of 2005 and represents a drop of 7 percent over the past two weeks.

The DRAM industry faces two main troubles these days, a glut of excess chips and waning demand because most PC makers have finished stockpiling the chips ahead of the holiday season. In fact, a number of industry players have been dumping their excess chips back onto global markets in recent days for fear prices won't improve anytime soon, according to DRAMeXchange.

The current price for the chips is also a danger to DRAM makers because it's nearing the cost of production. Goldman Sachs estimates that for companies operating older, 200mm (8-inch) chip plants, the cost of production is around $1.90 per DRAM chip, while on new, 300mm (12-inch plants), the cost of production is around $1.30 per chip.

DRAM chips, which retain data while a computer is turned on, are so common that they trade on open spot markets in the same manner as commodities such as oil and wheat. Chip prices tend to fluctuate in response to supply and demand, and in particular demand for PCs, where most DRAM chips end up.