One issue that can affect FME performance when you're working with very large datasets is available RAM. If you run a very large dataset through a workspace, you may see a message box that says “Out of Memory. Please free some memory, then choose retry.” What this means is that no more memory can be allocated. You can try the following options:
If you have 4 GB of RAM (available in version FME 2006 GB and above), you can try turning on the 3GB switch.
You can also refer to the hints in Performance Tuning FME.