TAIPEI, TAIWAN: While DRAM spot prices sustained a mild increase last week, according to DRAMeXchange the prices of DDR2 1Gb 128x8 eTT and 512Mb 64x8 eTT surged on 4/21 and recorded an increase of 5.32 percent and 6.69 percent, respectively.

The magnitude of such increase was large, buyers appeared conservative over procurement. Since the price correction in 2HFeb, this price surge becomes the strongest one recently. This growth stems from the anticipation of price increase; however, sellers are being reluctant to sell after a long price correction.

As for contract prices, DRAMeXchange analysts indicate that DRAM contract price posted an average of 3 percent increase in 2HApr. Despite the trend in May remains still unclear, the market consensus reveals that an upward trend during June to August (or even until September) in the upcoming seasonality appears promising. Besides the impact from seasonality, the fact that PC OEMs may acquire more 1Gb modules before its average price reaches $20 USD is another growth driver.

From a supply perspective, a Korean maker's QoQ bit growth slows down due to lower-than-expected output from 6xnm. Inotera from Taiwan, at the meantime, is also expected to have lower output amid transition to 70nm. All these indicators will cause a drop in 1Gb DRAM supply.

Major DRAM makers in Taiwan, including ProMOS, PSC, Rexchip, and Nanya, plan no additional wafer starting in 2H08. Some others are also planning to cut supply. All these plans indicate that DRAM supply growth will be weakened; therefore, price of DDR2 is likely to gain a 30 percent growth accordingly (512Mb from $0.90 to $1.25 USD and 1Gb from $1.96 to $2.50 USD).

Furthermore, shipments of desktop PC is steadily growing and most notebook vendors are having shipment schedules on track, despite some are still being affected by battery shortage. Most notebooks are now equipped with 1GB or 2GB modules and the majority of which are built with 1Gb component.

Most 512Mb components are applicable for 512MB module for sale in systems for emerging markets. As shipments proportion of 1Gb component has already outpaced 512Mb, steady PC shipments growth in April should promise a gradual demand growth for 1Gb component -- meaning a equilibrium is ahead. Shipments of 512MB module in systems is low, where shipments ratio between 1GB and 2GB module is about 6 to 3 (or more).