Predicting the spot trend presents a dilemma.

Spot is still looking down this week

Because of a lack of demand and an unclear signs, spot market volumes have remained low. Pricing has been slowly trending down, even DDR products. The global clone market size appears to be shrinking with no postive signs of picking up yet.

Channels Inventory issues

Channel inventory that was built up by traders in July has not yet been consumed in August. Overall channel inventory levels are remaining at safety levels (most are within one week). Traders, unlike module makers or PC OEMs, do not consume inventory but rather they are the middle men. Traders seem to be holding inventory and waiting for more clearer signs towards the end of August.

More concern about increases in supply and end-demand sell through

Although PC OEM rolling forecasts still look OK for August and motherboard makers are forecasting over 10% MoM growth, marketers are still concerned about:

1. PC OEMs buying could just be safety inventory building for anticipated peak season demand. If end demand does not pick up soon, and those products do not sell through to end consumer, we could experience another channel inventory build-up.

2. DDR output is increasing sharply from yield rate improvments and product migration from SDRAM to DDR which could result in DDR oversupply.

3. Clone market may continue to show weak signs.

4. Traditional season demand uptick does not materialize.

Downside vs. Upside chance?

Marketers now have two perspectives on price trend. One is there could be an upside beginning from the end of August and lasting until the middle of September. The reasons are:

1. PC and Motherboard shipment figures are good.

2. CPU price cuts should improve the situation and orders have been delayed from 1H of August.

3. Market makers will try hard to manipulate prices for a last attempt to keep price up.

The other view (pessimistic) is that there will be no upward trend over the coming weeks (because of oversupply and no end-demand to support prices)

Price won't fall too low.

No matter your view, we believe there still is a ceiling on potential uptrends because of the coming supply increases and inventory levels in the channel. On the downside, we also believe there is a supporting bottom for prices in the short term period.