More DRAM contract price drop likely in 2H Aug

More DRAM contract price drop likely in 2H Aug

Inventory issue among OEMs and an unclear demand visibility for Christmas may drive prices down, says DRAMeXchange

Wednesday, August 20, 2008

TAIPEI, TAIWAN: According to DRAMeXchange, DRAM spot price failed to rebound after 1Gb DDR2 eTT dropped below US$1.80, a benchmark for a price bottom, on August 7.

In the week August 12-18, price of 1Gb eTT DDR2 has dropped by 1.7 percent from NT$1.79 to US$1.76, whereas price of 512Mb DDR2 eTT also fell by 3.7 percent from US$0.81 to US$0.78.

The price drop was relatively mild in the branded segment. Price of branded 1Gb DDR2 667 was flat at US$1.86 and price of 512Mb DDR2 667 was down 2.4 percent from US$0.85 to US$0.83.

Spot price has steadily declined since the Beijing Olympics inaugurated as back-to-school demand did not occur and China curbs smuggling during the games. Inventory in the spot market stayed high without any channel to ease.

Industry participants said any demand pickup in China over September may be offset by weak season in Europe. As distributors still own over one month worth of inventory, spot price may continue to be weak for the rest of the year.

DRAM contract price is expected to decline by another 5 percent HoH in 2H August, following the same-rate of drop in 1H August. By 2009, prices of 1GB and 2GB DDR2 667 may again correct to the price trough as seen in early FY08, i.e. 1GB at US$16 and 2GB at US$32.

Weak spot price at contract market is not showing any potential price upside. DRAMeXchange records that price premium of contract price has enlarged to 21 percent for the two markets as of August 18 (spot US$1.86 vs.contract US$2.25), up from 13 percent as recorded in late April (spot US$1.88 vs.contract US$2.16).

Also, the inventory issue among OEMs and an unclear demand visibility for Christmas, are also factors that may drive a downward price trend.

©CIOL Bureau