The impending launch of Microsoft's Windows Vista operating system is driving strong growth in sales of DRam memory chips, according to analysts close to Asian memory chip makers.

But despite this high demand, prices are continuing to fall as manufacturers expand capacity.

Michael Hoosik Min, a Seoul-based analyst with Korea Investment and Securities, suggested that several factors have come together to boost demand for memory chips. 

"Windows Vista will be launched at the end of January and strong demand is expected in Asia ahead of Chinese New Year," he said.

"And Nintendo's game consoles are selling well, which is especially positive to the graphics memory market."

Early usage reports suggest that a fully functional installation of Windows Vista will need up to twice as much memory as Windows XP to function smoothly.

Some reviews recommend 2GB as a reasonable amount. Microsoft claims that as little as 512MB is sufficient for a basic installation, but anecdotal reports do not appear to support this.

As a result of manufacturers, PC vendors and retailers stockpiling memory chips for Vista's launch, DRam shipment value rose more than 60 per cent in November, according to Tokyo-based Nomura Securities analysts. 

Despite falling prices, manufacturers are still increasing output. "DRam makers are converting to 70nm rather than 80nm processes and this can expand DRam supply volumes in the future, meaning a negative factor for prices," said Min in a research summary published last week.

Between mid-December and mid-January, the spot price for a 512Mb 533MHz DDRII DRam chip slid slightly from $6.25 to $5.92.

This trend is certain to continue, market observers say. "We think that [DRam] prices will decline 29 per cent in 2007, in line with reductions in [manufacturing] costs," said the Nomura analysts.

Manufacturers are increasing their expenditure on equipment, meanwhile, bringing a rise in output.

The traditional Chinese lunar new year holiday, which is seen as an important driver of consumer electronics demand, falls in mid-February this year.

Companies award substantial annual bonuses at this time, and cash gifts are exchanged between family members.

As a result of these large amounts of free cash abruptly injected into the system, the holiday has become a consumer spending frenzy which is broadly comparable in its effects to Christmas in the West.

As well as China, the holiday is celebrated in several other countries, including Taiwan, Singapore, Hong Kong and Malaysia.