It didn't take long for the

DRAM market to crack.

Less than two weeks after flailing Korean chipmaker


shut down market leader


(MU) - Get Report

acquisition attempt, memory prices on the spot market are reeling. Micron had hoped to shut down some of the troubled manufacturer's production to further stabilize prices in the DRAM, or dynamic random access memory, market. Instead, spot prices have fallen 33% after months of recovery from 2001's lows.

According to many around Wall Street, prices for a 128 Mb SDRAM component have precipitously dropped from about $3 to more like $2 to $2.50 on the spot market.

Spot market prices are naturally more volatile than the prices called for in contracted building done for PC manufacturers. Additionally, sellers on the spot market do not have to meet the more demanding building and shipping requirements of PC makers with their just-in-time inventories. That leads industry followers to believe that less-reliable Hynix could be a main culprit of the speedy drop.

Keep in the mind that last fall, prices for memory deteriorated to the $1 mark but in the months since have climbed back to respectability. Such a speedy drop in prices hints to David Wu at Wedbush Morgan that Hynix is to blame. "If someone is selling at $2 to $2.50, they're losing money for sure," Wu says. "It seems to be a very confused company, maybe one that needs to clean inventory out to pay the bills."

With such a sharp dip, however, Wu expects a quick recovery. "Desperate people can't last forever," he says, describing a pendulum effect that keeps DRAM prices from sustaining dramatic up or down moves over long periods of time.

Investors will remember a brutal 2001 with little in the way of PC sales to revive memory prices, however. News from the PC sector isn't exactly phenomenal at the moment, as slightly stronger-than-expected first-quarter PC sales do not seem to indicate a progression to the second-half tech-spending revival companies and analysts originally predicted for late 2002.

However, Wu argues that normal supply and demand would not account for such a rapid move, and he credits the recent DRAM price fall to "artificial forces." Micron investors have been braced for such erratic market behavior since the Hynix talks seemed to stall in April. Micron's shares have lost 33% since the beginning of April.