TAIPEI, TAIWAN: DRAMeXchange indicates that a dismal DRAM spot price was observed last week, with price of DDR2 eTT 1Gb once dropping below US$2. Since there is price gap between spot and contract, some OEMs have started to buy parts from the two "spot focused" DRAM vendor.

A dismal DRAM spot price was observed last week due to: 1. PC shipments likely to fail 2Q expectations; 2. flurry of speculations about possible circulation of defective Samsung chips at spot market. Magnitude of price drop was relatively sharp at 5 percent, with price of DDR2 eTT 1Gb once dropping below US$2.

The sharp price fall is mainly driven by the above mentioned negative news. Industry players are generally maintaining positive outlook. Despite transaction volume was not big once price started falling; strong buying is observed when price dropped below the US$2 mark. It thus resulted a stabilized pricing. As of today, price of DDR2 eTT 1Gb managed to maintain above US$2.

DRAMeXchange points out that in the contract market, DRAM contract prices have appreciated by about 2.3 percent in 2HJune. Despite several major OEMs had special deal term in May, those smaller-scale OEMs without special deals, who have to accept the price hike, thus led to such a sequential price growth. Many DRAM makers noted that present supply is still trailing behind demand and they are unable to meet all customers' orders. PC shipments trend and a possible shipments guidance revision will judge future DRAM price adjustment ratio.

Instead of spot price, contract price took the lead of the rally this time. If we calculate the price from the1GB and 2GB modules, the 1Gb chip contract price is $2.38 and $2.56 respectively. These numbers are higher than the spot price of major brand 1Gb chip price which is $2.1, and also 17 percent and 27 percent higher than 1Gb eTT.

This situation is quite different from the past DRAM price rally and mainly caused by the following factors:

1. Certain Taiwanese DRAM OEM Fab, which make chips for spot major DRAM vendors, increased output fast in 07Q4 and 08Q1.

2. Module houses, which are the major demand in spot market, increased inventory level in March while spot price was relatively low, and slow down the buying momentum in May and June.

These resulted in the spot price of 1Gb eTT remained sluggish at the $2 range. Since there is price gap between spot and contract, some OEMs started to buy parts from the two "spot focused" DRAM vendor.

Comparison between DDR2 contract and spot price