Will the iPad Really Push Down PC Memory Prices, or Not?

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Will the popularity of the iPad and other tablets truly help to drive down PC RAM prices? That’s the prediction of one industry report, although experts differ over whether tablets are actually replacing PCs, the extent of any slowdown in PC sales, and a number of related questions.iPad

According to a report in Apple Insider, pricing on DRAM memory is expected to fall due to an oversupply in the market “thanks in part to devices like the iPad which use fewer DRAM components than traditional PCs.”

Analysts have been at odds, though, over whether tablets are really biting into sales of bigger PCs, or whether the devices are instead simply acting as additions to the gadget collections of early adopters.

Also, even if overall PC sales are waning among consumers, it’s unclear at this point whether the business PC, server and smartphone markets might gobble up enough DRAM to keep demand for the memory chips strong.

‘PC market is not in good shape’
The report in Apple Insider cites an account by Reuters containing remarks by Kwon Oh-hyun, the head of Samsung’s chip business, and John Chiu, a financial analyst in Taiwan.

“If the PC market continues to slow, we may see a kind of oversupply [in DRAM] in Q4 or Q1,”Oh-hyun reportedly said, at a media conference in Taipei.

“We all know the PC market is not in good shape now and if demand can’t pick up, inventories will go higher,” according to Chiu, a fund manager at Fuh Hwa Securities Investment Trust.

Smartphones, PC Servers, and All-In-One Sales Rising

Also according to Reuters, though, Oh-Hyun reportedly added that, “Because of mobile phones and servers, the DRAM market will be stable,” a comment not included in Apple Insider’s report.

Indeed, IDC this week raised its projections for smartphone sales. The analyst group now expects shipments of 196.6 million smartphones in 2010, for a growth rate of 55.4% over 2009.

Separately, IDC recently reported a 36.6% growth rate in sales revenues from Windows and Linux PC servers from the second quarter of 2009 to the second quarter of 2010.

Last week, the same analyst group lowered its projections for consumer and portable PC sales while revising its projections for the overall PC market upward and continuing to predict “solid double-digit growth” for PCs in general.

Netbook Slowdown Not Just Caused by Tablets

According to IDC analysts, slowing demand in the consumer and portable PC market will be accompanied by a slight boost from all-in-one desktop PCs and a more substantial rise in PC buying by businesses, from small companies to the enterprise level.

Furthermore, while netbook PC growth is likely to decline, competition from “emerging devices like the Apple iPad” will be a less important factor in this probable slowdown than “growing saturation [and] competition from mainstream notebooks.”

On the other hand, a recent report by iSuppli indicates that DRAM is already becoming a less profitable market for chip makers, for whatever reasons.

Among the top-five DRAM suppliers worldwide, revenues from DRAM dropped 5.9% in the second quarter of 2010 from the same quarter last year, according to iSuppli.

However, DRAM revenues for Samsung, the top supplier, expanded by 24.3% over the same time frame, to a total of $3.8 billion for the quarter.

Jury Still Out

Still, profit margins on DRAM seem to be shrinking, at least among some smaller DRAM suppliers.

SSDsEarlier this week, chip supplier OCZ Technology Inc. announced a decision to stop production of some lower-margin DRAM products in favor of higher-margin specialty and high-performance memory product such as solid state drives (SSDs).

Lower prices on DRAM could be music to the ears of consumers and businesses alike, since PC prices would be likely to fall accordingly.

Yet if smaller suppliers end up getting squeezed out of the DRAM market wouldn’t the ensuing market consolidation tend to push DRAM prices higher again, anyway? 

The jury still seems to be out on a lot of issues around future DRAM pricing, including the roles that the iPad and other tablets might play. 



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