DRAM price correction ahead, DRAMeXchange reveals

[Apoptosis]

DRAM price correction ahead, DRAMeXchange reveals

September 12, 2006 --- Although the buoyant DRAM price trend persists last week, DRAMeXchange foresees risk for price correction in near term as the spot prices have been rocketed before. Contract prices, in contrast, should continue trending upward, thanks to the seasonality PC demand growth in Sep to Oct. On the other hand, After the eight-month-long price correction, prices of NAND Flash continue showing positive sign this week and this is justified by the generally wide-acceptance of contract quotes in 1HSep.

Overall DDR2 eTT(UTT) supply drop enabled distributors taking this opportunity to earn profit and resulted in the sequential price swell of 16.8% (closed at US$6.96 on Sep 11). The reduced supply is also a reflection of ramping up 90nm production proportion among chipmakers, which in turns lowers the output of DDR2 512Mb 64Mbx8 533MHz. Since marketers still in favor of chips with lower quotes, price of DDR2 512Mb 64Mbx8 533MHz still enjoyed price gain and closed at US$6.50. Price gain of DDR2 eTT (UTT) chips exceeded contract market¡¦s last week. Prices of DDR, at the meantime, were stimulated to grow slightly.

Reviewing the contract prices in 1HSep, price up of DDR2 was still limited as some PC OEMs have already secured long-term supply deal with chipmakers during May to Jun. Prices of DDR2 512MB 533MHz and 667MHz DIMMs were mostly settled in the price range of US$43-45 (or US$5.06-5.25/chip) and the difference with spot quotes are still large (Figure 2).

Disregard the huge price difference between the two marketplaces, DRAMeXchange doubts further growth possibility of DDR2 as our analysis model suggests that the historical pattern of price difference should fall within the range of 4% only (Figure 3).. The probability for a price difference surpassing 10% is only 15% and this is rare in the historical price trend. Since the present quote for DDR2 at spot market has rocketed to as high as US$7 recently, a price correction is likely to arrive soon, though the anticipated contract price growth in 2HSep should still lag behind spot trend.

The growing strong seasonality not only benefits DRAM but also SDRAM. DRAMeXchange observes that some consumer electronics makers have started pre-stocking. However, the price trend of SDRAM just remains stable rather than trending up as chipmakers have already ramped up their capacity. Closed price of SDRAM 4Mx16 was US$0.85 on Sep 11 while 8Mx16 was US$1.79 and 16Mx16 stayed flat at US$2.89.

Industry-wide NAND Flash demand upbeat unquestionable

After the eight-month-long price correction, prices of NAND Flash continue showing positive sign this week and this is justified by the generally wide-acceptance of contract quotes in 1HSep. DRAMeXchange believes the recent price upside hints us an industry-wide demand pick-up.

Buoyed from the pre-stock preparation for Christmas, DRAMeXchange projects demand will grow obviously during Sep to Oct- a critical jump in requested volume in compare with either 2Q or Jul to Aug period. Some NAND Flash suppliers whom have started adjusting their SLC and MLC proportion has spurred price up recently and we believe NAND Flash spot price to persist its upside strength through Oct.

Reviewing spot price trend last week, NAND Flash continue enjoying the price upside across the board. Prices of the high-density 8Gb and 16Gb lead the growth with a respective sequential gain of 10% and 8.6% while the smallest gain is recorded at 1.4% level for 1Gb part. The prices swell of certain density NAND Flash, especially for the high-density ones, could be interpret as an industry-wide demand uptick.