A chronic DRAM over-supply problem has led to Samsung refusing to supply memory modules to Dell and HP at loss-making prices.

Gartner research predicts a 4.7 percent decline in the DRAM market this year as a hoped-for Vista demand boost fails to rescue the industry.

In a Digitimes report HP, Dell and other PC manufacturers have requested DRAM supply from Samsung at prices of $14, and US$28 for 512MB and 1GB DDR2 DRAM modules.

These are down from contract prices of $17.50 and $35, respectively, in May. Samsung declined to supply DRAM at these prices as it would have been below cost. (£1.00 converts to around $1.80 at standard conversion rates.)

Other DRAM foundries owned by Hynix and Nanya have agreed to supply at the requested prices. For comparison, 1GB of DDR2 DIMM or SODIMM memory at PC World costs £57.99.

It is expected that DRAM prices are lower at this time of year due to softer demand. But Gartner research suggests that the DRAM market is stuck in fierce price competition due to suppliers' over-capacity, and it will affect them for the rest of this year and the next. In fact there has actually been a recent small price rebound but not enough to affect Samsung's decision.

Gartner research has revealed that overall semiconductor sales revenues in the first quarter of this year were more than 5 percent lower than in the preceding quarter. This, Gartner believes, is much more than any revenue decline expected from inventory increases at the time of year.

Richard Gordon, a research VP at Gartner, said: "Since the beginning of this year, soft semiconductor market conditions have been exacerbated by sharply declining ASPs (average system prices) in key device markets such as DRAM, MPU (microprocessors) and application-specific standard products (ASSPs). It is likely that, despite continued unit growth in influential electronic systems markets, downward device ASP pressure will remain in place for much of 2007 as oversupplied semiconductor market conditions persist.”

As a result Gartner is now predicting an 11.1 percent DRAM revenue fall this year, followed by a milder revenue decline in 2008.

It is clear that any hope for increase in DRAM demand following Microsoft's Vista O/S introduction has simply not happened.

It may be a good time to increase your server and PC memory amounts with prices being so low, also for notebook computers although that often means discarding the current DRAM. It is not such a good time for Apple notebook owners however, as memory prices in that niche market are much higher. A gigabyte of DRAM of DDR2 memory for a MacBook is priced at £120 in Apple's UK stores, slightly more than twice the equivalent PC World Windows PC DRAM price.