Demand for DRAM did not recover after the Beijing Olympics. Memory module
makers, who realize that their expectations have failed, are starting to
initiate price cut in China.
According to DRAMeÂXchange, price of DDR2 1GB eTT dropped by an approximate
of seven percent within single day to $1.51, marking a new record low since Nov
27 (at $1.57). Price of DDR2 1GB eTT declined by 20 percent throughout August.
And the price of branded DDR2 667 1GB has also dropped to new low at $1.65 in
the same period.
Some industry players explained the 10 percent sequential DRAM contract price
drop in 2HAug to a noticeable drop in PC OEM demand. Amid a weak economy trend
and unclear demand visibility for Christmas, PC OEMs have started trimming their
inventory from a six-eight-week amount. Some orders were even said to be
cancelled. DRAM makers thus have no alternative but to lower their price
further. Given that the downward price trend is solid, price should hit bottom
in October.
After seeing a price plummet in early 2007, DRAM makers still fail to see
their ASP rises above cost, despite pricing has shown some temporal rebound or
stability. Thanks to pre-stock procurement among PC OEMs and traders, price
appreciated by more than 20 percent in Q2 2008. Some DRAM makers thus expect to
swing from loss to profit under an anticipation that the upward price trend
would sustain.
Aug 26 |
Sep 01 |
change (%) |
|
DDR2 1Gb (128Mx8) 667MGz |
1.83 |
1.65 |
-9.8% |
DDR2 1Gb (128Mx8) eTT |
1.72 |
1.51 |
-12.2% |
DDR2 512Mb (64Mx8) 667MHz |
0.81 |
0.76 |
-6.2% |
DDR2 512Mb (64Mx8) eTT |
0.76 |
075 |
-1.3% |
DDR 512 (64Mx8) 400MHz |
1.22 |
1.13 |
-7.4% |
DDRMB (64Mx8) eTT |
1.21 |
1.12 |
-7.4% |
Source: DRAMeXchange Note: Listed prices were quoted from the latest session on August 26 and September 01 on DRAMeXchange website. |
However, spot price later posted a sharp fall in early July, followed by a
weakening contract price trend in late July. While price seems having no upside
catalyst in Q3 2008, inventory clearance pressure is intensifying on an eroding
demand. When more industry players expect a supply trim to drive price upward,
DRAM makers have no way back but to continue expanding and shrinking design
geometry. Therefore, pace of DRAM cost down lags behind ASP erosion.
DRAMeXchange analysts indicate that in addition to increased output from 50nm
generation migration, new camps are also expected to fill the market with fresh
capacity. Nanya, which has forged partnership with Micron, is expected to add an
extra capacity of 30k per month at its Fab 3 during the second phase production.
Fab 2, which is scheduled to remodel as 12-inch fab, will also contribute
another 45k of capacity.
Rexchip also has plans to expand capacity at its R2 to 30k in 2009. Elpida
will also tie-up with UMC and Suzhou Venture Group (SVG) for a 12-inch wafer fab
in China. The aggressive expansion plans imply that oversupply will continue
weighing on DRAM makers' profitability in near term. Under such an industry
trough, a market mechanism will edge out those players with poor cost structure.