Contract, Spot take different positions

Contract price - still try to hike up

Contract price for 2H September are still on negotiation. However, DRAM makers are still trying to hike up a little bit. We believe that contract price will most likely set down from the flat (major portion will be the range from $53 to $57 for 256Mb DDR) to a slightly up. SDRAM still looks downward.

Major reasons for DDR still can hold on current price level:

1. Inventory of DDR in DRAM maker sides are still keeping in the low position, DRAM makers still can tighten the allocation.

2. PC/ Motherboard shipments are still running positive growth rate in this month. (Although the visibility of next month is unclear.)

3. PC OEMs also run the low inventory level policy so they still need to purchase this month.

Spot prices begin to trade down

On the other hand, spot price began to show the different sentiments. Channels and module makers began to lose confidence in coming season.

1. Worry about the continuing global DRAM supply increase in DDR from Oct. (especially most DRAM makers claim the mass DDR output will come out in Oct.) More and more "good" news in improving yield rate on the new micron process and production allocation to DDR. Those issues increase the risks of over supply concerns to bring down the price.

2. The result of back-to-school was as low as expected which influenced the inventory of back-to-school replenishment carries through to Thanksgiving and Christmas.

3. Still no good signs of demand improvement in clone market and upgrade market. Plus the month/quarter end is coming; the selling pressure probably will begin to take place in the near future to bring down the prices.

Inventory adjustment from channels and traders already silently began in the floor which began to trade down the price. If outlook of demand segments don't improve soon and outputs keep dramatic increase, prices will keep drop down. Nevertheless, if contract can succeed in rising, spot prices probably have the chance to turn to uptrend for a short-term period.