While prices will fall, the overall DRAM market will recover in the second half as suppliers see stellar growth in bit demand, according to researcher IC Insights.

The researcher says that DRAM bit shipments will surge 81% in 2007, the highest percentage increase since the 88% increase recorded in 1998. That increase is driven by strong PC growth and growing memory content in PCs due in part to Vista, Microsoft's new operating system which requires more memory.

PC shipments are forecast to increase 12% in 2007, with the average PC expected to contain 1.4 gigabytes (GB) of DRAM, an increase of 75% over 2006, when memory per PC averaged 800 MB. The average system memory per PC is expected to grow from 1.3GB in the second quarter to 1.4GB in the third and 1.6GB in fourth quarter of this year. Some DRAM suppliers forecast that as many as 45% of PCs shipped in the fourth quarter will contain 2GB of DRAM, the amount required for optimal performance using the Vista operating system.

In addition to PCs, handsets and video game consoles will also help drive DRAM demand in the second half. The Xbox 360 uses 512MB of graphics DDR2 DRAM; PlayStation 3 uses 256MB of XDR DRAM, and the Nintendo Wii is equipped with 64MB graphics DDR3 DRAM.

Meanwhile, increased DRAM content in new-generation handsets and other personal mobile products will generate more growth opportunities for DRAM suppliers. A cell phone shipping in 2007 has about 28MB of DRAM.