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TAIPEI, TAIWAN: DRAMeXchange indicates that a low transaction volume during seasonal downturn is normal, but a divergent price trend in two market places is indeed rare.
In two weeks time, spot price of eTT 1Gb dropped by 8.4 percent, down from the high-level US$2.15 in mid June to US$1.97 on June 30. A divergent price trend is observed in DRAM contract and spot market. While DRAM contract price is trending up steadily amid tight supply, the downward spot price trend only reversed to a flat trend last week after experiencing consecutive drops since mid June.
The performance of spot market can be explained from supply and demand. On the supply side, Rexchip was ramping up in the 1H08 and created excess supply to the spot market. On the demand side, since the China government enacts a stricter policy on customs checks prior to the Beijing Olympics, distributors found difficulties to their shipments.
The pending parts, which couldn't enter China partially, end up in the spot market else where and created pressure to the DRAM spot price. Some industry players were even skeptical about a fundamental demand weakness. Buyers, on the other hand, turned reluctant as they were worried that the increased volume may stem from quarter end inventory clearance at upstream. These factors slowed down the buying side.
DRAMeXchange believes that amid the aforementioned reasons, Rexchip had ramped up most rapidly during Q1~Q208 and reached full capacity in Q208. The upside of Rexchip output in Q3 is limited.
On the China issue, as long as the real demand doesn't become weak, the situation mentioned above will be solved by market mechanism after the Olympics. Quarter end clearance had also been done now. Given that the price gap between contract and spot prices encourage OEMs to increase their procurement proportion to the DRAM makers who mostly used to do spot and module house business.
If the vendors passed the certification and once the procurement volume increased sufficiently, this would become another consumption path of the spot market supply. Unless the demand of DRAM is far below expectation, the spot price should consolidate and go up again. DRAMeXchange foresees that there should be 10~20 percent upside of 1Gb eTT in Q3.
