Users say: Thanks for the memory, but we shun new hardware

Memory chipmaker Infineon yesterday tried to talk up the chances of a quick resurgence in memory prices, with CEO Ulrich Schumacher saying he envisages prices rising 20 per cent or more in the near future.

Infineon, along with other memory chipmakers, is currently selling chips beneath cost price, with the market at an all-time low. However, vendors and resellers are starting to see demand for memory increasing, as IT directors try to squeeze the most out of existing hardware.

IT directors are currently engaged in a retrenchment, with corporate budgets being slashed to keep costs low. Consequently there is much lower spend on IT hardware, and a tighter focus on pushing existing IT to the limit by adding extra memory and storage.

The trend is contributing to the hit that traditional hardware vendors are currently experiencing. Frank Coyle, IT director at John Menzies, said: "My budget is smaller this year than last, so I'm looking even more than usual to cut costs. I will do this by buying memory to lessen spending on hardware."

He added that many in the industry are taking the same route. However, the industry is still sceptical as to whether this demand for memory will force prices to rise significantly.

Manny Pinon, sales director for reseller Norwood Adam Distribution, said: "The demand is strong right now, but that will evaporate quickly if prices go up."

Gartner Dataquest says the worldwide chip market is set to shrink nearly 17 per cent this year, so the desire for memory is against a background of falling revenues. Andrew Norwood, senior analysts for Gartner Dataquest, said: "We don't believe the extra demand from IT directors for memory will offset the drop in PC shipments. We don't think prices will recover until well into 2002."

IT director Coyle had a warning for vendors considering raising their prices: "Everyone is going through a hard time at the moment, and IT directors form a huge part of the vendor's customer base. If you think you can raise prices now you've got another thing coming. You upset us at your peril."