News flows were quite active last week, after a long period of silence. The major headlines are 1) CEO of Elpida said the company will raise DRAM contract price by 20% in April, 2) Samsung reportedly will have a similar move, 3) about 27-30mn of DRAM chips made by certain Korean vendor were found defective and rejected by customers. Some of the news mentioned above stimulated the DRAM spot price last week. The 1Gb DDR2 eTT chips were back to US$1.76 this Monday because the market participants were unwilling to sell down as prices were already low. Some buyers also turned aggressive as they reacted to the news.
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Major DRAM suppliers profited from their aggressive expansion in 2005 and this good fortune continued as the price of DRAM kept on going up in 2006. However, this boom did not come without consequences. This rapid growth in capacity, in addition to an over-optimistic projection on Microsoft Vista's demand for DRAM, has caused numerous industry suppliers much suffering since 2007. As those first-tier suppliers, who are finding it difficult to squeeze second-tier suppliers out, they will see intensified cost pressure. DRAMeXchange analyst, points out that some DRAM suppliers are still considering the present DRAM depression as a best opportunity to expand their market share. The DRAM market-share game is now shifting from a knockout to a marathon without a winner, and the whole business loses, according to DRAMeXchange.
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On the sideline of Nanya and Micron’s announcement of a joint venture on 50nm and below DRAM technology, Qimonda has also introduced its latest stack DRAM technology – Buried Worldline. The introduction of Buried Worldline, at the meantime, marks a farewell to trench technology on 58nm and implies that trench DRAM technology has meet its limit with sub 58nm node to all transit to stack DRAM technology.
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Amid the Lih Duo bounce check issue, financial status at memory module makers again draws attention. The entire DRAM industry (except for backend houses) is bleeding in red alongside with the aggressive DRAM expansion. Take the price of DDR2 eTT 512Mb for instance, its price has been nose dived by 88.1% from US$7 in September 13, 2006 to the current US$0.83. Under this severe price pressure, memory module makers could hardly avoid losses if they fail to ease inventory fast. Those less competitive players are forced to exit the market, while those left behind strive to strengthen their competitiveness.
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Amid Nanya and Micron’s latest JV on 50nm and below DRAM technology, DRAM industry marks a new page for vertical and horizontal integration. Recalling the DRAM industry in 1998, rapid expansion of 8-inch wafer that led to price plummet of SDRAM, has eventually resulted in a wave of consolidation among industry players. A similar scenario arrives this year when DRAM makers are aggressively boosting their 12-inch wafer capacity on one hand, and weaker-than-expected Vista impact led DRAM price drops below variable cost on the other. Without a market consensus of expansion trim, DRAM makers are likely to enhance their profitability and cost structure in a fundamental manner via consolidation.
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DRAM technology, which used to be clearly classified into stack and trench structures, is about to see fundamental change amid leading advocators’ technology development and cross partnership.
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DRAM spot prices keep heading south after seeing price of DDR2 512Mb eTT and DDR2 1Gb eTT dropped below US$1 and US$2 mark on February 13 and February 15. Price of the former dropped by 15.7% over the weak February 12-20 and closed at US$0.86, where price of the later dropped by 21.3% in the same period and closed at US$1.66.
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DRAM transaction in the spot market was weak last week in terms of both pricing and trading volume, primarily due to weak demand. While for the contract market, DRAM supply-demand status suggests that quotes should stay flat in 2H Feb with less opportunity to see upward price trend in near term.
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It was Chinese New Year Holidays last week and most Asian spot markets were closed. Taiwan spot market started trading again on Tuesday, where a higher trading volume began to appear in the afternoon, but was still considered relatively low. In the China spot market, players are still in their way back to work, thus the trading momentum was even lower. Last week (2/4-2/12), DDR2 512Mb eTT and DDR2 1Gb eTT dropped 0.97% and 1.4%, average spot price closed at US$ 1.02 and US$ 2.11 respectively. The difference between DDR2 1Gb chip price and DDR2 512Mb is converging.
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After the strong spot price rally in the first half of January, the Pre-Chinese New Year buying activities had come to an end, DDR2 512Mb eTT had surged up from 0.8 to a high of 1.22 USD. The spot price remained stable in previously (Jan. 22nd to Jan. 28th) and slightly dropped this week (Jan 29th to Feb. 4th) with DDR2 512Mb eTT and 1Gb eTT daily average spot price dropping 1.9% and 1.38% respectively, but still standing above 1 and 2.1 USD level. The market transaction momentum has slowed down already with less volume. Some explained the short term sluggishness was caused by the heavy snow storm in China, but actually it‘s caused by the end of Pre-Chinese New Year inventory preparation.
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