The Dram price freefall appears to have bottomed out as prices increased in July. However, further price erosion can not be ruled out because of high inventory levels.

DRAM prices started to recover in July after falling by about 70% from January to June. The contract price for a 512 megabyte DDR2 module increased by about 5% in July as suppliers adjusted prices to around the $20 level, according to DRAMeXchange.

Some DRAM suppliers say they expect prices to increase through the rest of the year, but that remains to be seen because spot prices for some products in late July were still falling.

For instance, the average price of a DDR2 512Mb (64M×8) DRAM fell from $2.17 on July 16 to $2.05 on July 23 on the spot market, says DRAMeXchange. The drop was probably due to high inventory levels.

"We remain concerned about the inventory situation in the DRAM supply channel," says Nam Hyung Kim, director and principal analyst for memory ICs/storage systems at iSuppli.

"DRAM suppliers' inventory has been reduced slightly. However, inventory in the spot market channel is still at high levels," says Kim. "OEMs also are believed to be carrying three to four weeks of inventory."

Kim says most distributors and other channel players purchased DRAM a few months ago at higher prices than current levels.

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