Why Contract is still higher than Spot

It's never happened to be contract price being over spot for such a long time on the uptrend period in the DRAM history. The reasons probably can be explained as

1. Supply side well-controlling the output - Actually almost major DRAM makers cut back output since last quarter (4Q01) that really reduced the worldwide supply. And since they are still very conservative/caution on the supply/demand balance, most of the cutting back operation haven't got back to fully production yet.

2. Die shrink process takes a little bit time to adjust the yield rate. DRAM makers usually takes the downturn seasons to do the die shrink process because it takes a little bit time to adjust the yield rate for better production output. Currently most of die shrink processes are still adjusting their yield rate to a satisfiable level.

3.Product Mix and Product allocation are not 100% matching the real demand this quarter due to product migration from 128Mb to 256Mb multiplying SDRAM with DDR which causes several combinations. And Intel's CPU and chipset's product shipping situation also heavy influences the demand for SDRAM or DDR.

4.Clone market seems declining or at least not that active which makes the spot market is more conservative to trace the high price without solid demand. At beginning, clone market probably lacked the P4 CPU's allocation to push the market demand. But even P4 is sufficient right now, the market still seems slow. The other reason probably is the clone market is shrinking by low-cost PC from major PC eroding the market share.

Above reasons probably can explain why some particular items are in seriously shortage and overall situation make the supply side can stand tight for controlling contract price. As we mentioned on topic "DRAM component and Module delivering Flow" (www.dramexchange.com/forum/forum_main.asp?row=470), 80% of the DRAM purchasing are based on Contract. PC OEM and system companies in order to keep the relationship and records on those DRAM makers for securing the future shortage season's supporting, sometimes they have to accept the fact of seller is on control of market.