TAIPEI, TAIWAN: The DRAM chip price has plunged since 2007 and suffered loss for almost seven consecutive quarters. The global DRAM vendors have lost $10 billion in 2007 and 2008, and among this, Taiwanese vendors stand at $4.2 billion.

Main reasons were the optimistic view toward the memory demand and the huge 12 inch capacity expansion in 2006. Capacity started production in 2007 and resulted in severe oversupply, and has caused DRAM price to drop.

According to the DRAMeXchange's statistics, from Q107 to Q308, the WW 12 inch DRAM fabs had grown 56 percent, and 57 percent of the eight-inch fabs had retired. The total average capacity had grown 21 percent. OEM had considerably raised the DRAM content per system to over 2 GB among PCs in Q208, it still could not follow the speed of DRAM capacity expansion. When the economy quickly slowed down in 2H08, the financial crisis became the last straw that broke the DRAM vendors’ backs, and the vendors started capacity cut in September 2008.

According to DRAMeXchange’s statistics, the number of new wafer in from last September to January 2009 decreased 22 percent worldwide, and among this, the Taiwanese vendors’ capacity decreased most and has reached 55 percent. Obviously, after the DRAM vendors announced capacity cut in September 2008, they still decreased their wafer in continuously even higher than the percentage they claimed.

Furthermore, with the strategy of limited shipment, the spot chip price started to show signs of rebound in December. First the spot DDR2 1G eTT chip price sharply rallied over 75 percent from mid December to now. The 1H January contract price first time showed signs of price stableness and stopped declining. After the PC OEM demand recovers, the price rebound is worth hoping.

In the spot market, the DDR2 1Gb eTT chip price fell below $1 in mid November 2008 and hit $0.59 bottom, after the effect of capacity cut and limited shipment strategy started, the chip price began to rally from mid December and once again reached $1 in January 7. In the week of Jan 6-13, the DDR2 1Gb eTT price started climbing from $0.92 to $1.01 with the range of 10 percent upside.

The DDR2 667 Mhz 1Gb also rallied from $0.78 to $0.85, with the range of 9 percent. From the market observation, with the effect of capacity cut and the shipment control strategy, previous procurement wave has come to a halt as the Chinese New Year is approaching soon and is waiting for future developments in the spot price market.

In the contract market, the 1H January contract price remained stable, the DDR2 667 Mhz 1GB and 2GB average prices were $8 and $16. The 64 percent of price dropping from last July had stopped.

From the market observation, with the coming Chinese New Year and the DRAM procurement demand in the EU and the US, and the DRAM vendors are willing to keep the chip price above $1, the total market supply will be controlled, and incubating the 2H January contract price rally momentum.