DRAM spot price evokes OEM's desire

TAIPEI, TAIWAN: According to DRAMeXchange, despite a low volume transaction atmosphere which persisted last week, spot price of eTT DDR2 appreciated by ~5 percent after a Korean maker said to have reclaimed those defective DRAM chips from OEM customers. Even without strong actual demand in the spot market right now, industry players generally think this may cause short term impact to the supply. With the low downside risk of DRAM price and the upcoming hot season, speculative purchasing shall soon be seen.

During the week June 3-9, price of eTT 512Mb and 1Gb appreciated by 5.1 percent and 3.98 percent each, at US$1.03 and US$2.09. In the branded segment, price of 667MHz 512Mb and 667MHz 1Gb each appreciated by 1.96 percent and 1.41 percent at US$1.04 and US$2.16.

DRAMeXchange analysts indicate that although an upward trend in contract price is guaranteed, the upward momentum had been weakened in 1HJune (up by only 2.5 percent compared to 2HMay). As sellers are taking strong stance to preserve the upward price trend, many PC OEMs are negotiating longer contract terms or more volume during May and June. Despite small issues of unexpected supply, channel checks show that present OEM inventory level is still healthy and is not yet serious enough to undergo stock purchasing.

Consolidations are occurring on DRAM vendor side and top PC OEMs are gaining more market share. Certain vendors and buyers are searching for more sources to diverse the risk of dependency. As spot prices are still lower than contract prices, OEMs will increase their procurement base to those suppliers who focuses on spot customers.

History shows that generally a DRAM price uptrend starts when DRAM spot price exceeds contract price and takes the lead in the beginning, so called as the golden cross. The present situation of higher contract price may cause by structural change of the DRAM market, as well as the distortion caused by the recent low transaction volume in the spot market. If the future supply-demand follows the expected guidance, under the situation of the growing contract market and the chance of less supply in the spot, we might see spot price perform the golden cross again.