Upturn in contract and spot prices still a long way off

:: Slight drop in 2H contract prices

Contract prices for SDRAM in the second half of May remain unchanged on the first half while those for DDR have dropped slightly. Mainstream 256MB DDR branded modules are priced at US$30-33. Overall, demand remains stronger for notebook SO-DIMMs than regular DIMMs. Faced with the possibility that SARS could shut down some notebook production in China, the likelihood of PC OEMs building inventory increases.

:: Low-density SDRAM prices also down.

Although SARS is having an impact, it is increased competition that is driving down prices of low-density SDRAM, including 1Mbitx16, 4Mbitx16, 2Mbitx32, used in products such as hard drives, DVD players, scanners and fax machines. Traditionally, this segment requires more design-in development work, but DRAM makers are looking for somewhere to offload their excess capacity. The battle has begun with low prices accompanied by guarantees of supply and stable quality. However, transaction volumes have remained low due to seasonal weakness.

:: Traders holding rather selling at a loss.

With an average inventory cost slightly exceeding US$3, DRAM traders are holding inventory in anticipation of a rosy second half. We still expect traders to buy in when prices drop below US$3 to lower the average cost of their inventory. Consequently, the room for a drop in price is limited.

:: Blank chips are more active in market right now.

As the end of the month approaches and companies need cash to pay down debts, non-branded 256Mbit DDR chips are selling at US$2.50 with ample supply. The price gap has boosted turnover of non-branded chips to exceed that of branded.

:: Hunt for low-priced 333MHz and 400 MHz DRAM continues

With no indications of a major shift in market shares prompted by the May 21 launch of Intel 865 series
(Springdale) chipset, the focus is on sourcing low-priced 333MHz and 400MHz DRAM rather than chasing down high-priced products. Activity in 333MHz and 400MHz DRAM is up on last week.