A new memory standard is settling in across the computing industry. DDR3 memory gives you faster memory at lower voltage than the old DDR2 standard, and the technology is coming of age. But how will this sea change affect your semiconductor stocks?
According to IDG reporter Dan Nystedt, DDR3 prices have jumped in recent weeks while DDR2 chips continue to approach the cost of breathable air at an alarming rate.
The new standard's pricing strength is born of high demand -- Intel (NASDAQ:INTC) is pushing DDR3 into Nehalem-based servers as well as Core i7 desktops and notebooks, while rival Advanced Micro Devices (NYSE:AMD) has joined the DDR3 fray with non-server Phenom II chips. You can buy systems from Dell (NASDAQ:DELL) or Hewlett-Packard (NYSE:HPQ) right now that feature DDR3 memory.
The whole memory industry has been in the doldrums for years, facing negative gross margins because everyone is making more chips than the end-user market can consume. The tattered global economy didn't help at all, of course. So moving high volumes of more expensive DDR3 chips is obviously great for memory makers like Micron (NYSE:MU) or Samsung. This could be the turning point where Micron can start dreaming about long-term profits again.
The trend should continue, too. Microsoft (NASDAQ:MSFT) will help out this fall with the release of Windows 7. The new operating system should actually require less memory than Vista, but the simple fact that this release appears to fix much of what was wrong with Vista should ignite a wave of whole-system upgrades. And lots of those fresh machines should come with DDR3 inside.
This industrywide refresh should give a vitamin shot to nearly every player in the PC and server markets. AMD's decision to keep this new technology on hold for its server line until 2010, when the Opteron line gets its first new motherboard platform in four years, may hurt the company's server sales -- despite the Istanbul chip's many advantages. The aptly codenamed Magny-Cours with its 12 cores per processor and DDR3 support should turn the tables again next year, but for now it's "advantage Intel."
Whether you see computer memory as an investment opportunity or as an indicator of the health of computing business in general, the rise of DDR3 memory is great news.
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