Memory chip buyers can expect contract prices for DRAM to fall because of weak PC demand and capacity oversupply, according to researcher DRAMeXchange.

The average price for 4GB DRAM module used in PCs dropped about 7 percent in July compared to June, the researcher reported.

Prices have also declined for DRAM used in servers. For example, average prices for 8GB R-DIMMs, which are used in many servers, drop 2 to 4 percent in July, DRAMeXchange noted.

As a result, DRAM manufacturers, whose products are typically manufactured on 40 nm process technology, are posting losses and the demand outlook for the rest of the year looks to be "unfavorable" for suppliers, according to DRAMeXchange.

While sluggish economies are partially to blame for weak demand, the main issue for the memory industry is the current level of production capacity, the researcher reported.

With the recent merger of Micron and Elpida, the number of leading memory IC makers was reduced to three, which should reduce price competition, DRAMeXchange analysts noted. However, no DRAM makers have announced capacity cuts or other long-term adjustments to DRAM production levels.

Meanwhile, DRAMeXchange forecasts that PC shipments will decline 0.3 percent in 2012, due in part to the growth of media tablets which are negatively impacting notebook PC shipments. In addition, weak economies throughout the world have resulted in lower PC purchases by both consumers and businesses.

Windows 8 is expected to spur PC sales, but the new operating system will not be released until later in the year. As a result of overall weak demand, the contract price for DRAM is also expected to fall in August, according to the researcher.

While DRAM manufacturers have tried to reduce cost with new advanced process technologies, new packaging, and new products, it has not been enough to balance out price declines caused by oversupply, DRAMeXchange reported.

The researcher added that if losses for DRAM manufacturers continue, there will be slower technology migration, less capital spending by memory IC suppliers, and capacity reductions.