As we projected, the 2H October contract prices was pulled down around 3% as pressure from much lower spot prices and most OEMs seek lower DRAM budget ratio of PC cost. Even though the DDR spot prices pick up and some market participants saw the DDR bottom out price of $3.9 on Oct.14 as a turnaround, however, the demand remains slow in both spot and contract markets.

The premium of 256Mb DDR contract price over spot price has getting widen since mid-August ( Chart I ) . On 8/14, the 256M DDR 1H Aug. average contract price was $4.95 and average spot price was $4.75, disparity : 4%. On 10/20, the 1H Oct. 256M DDR average contract price remains at high of $5.16 and the 256M DDR average spot price dropped to $4.30, increasing disparity to 20%. This is tougher for DRAM producers to raise or even remain the contract price unchanged. Even though there's a pick-up on DDR prices in spot market in past week, however, the Asia and USA channel distributors and traders remain cautious and didn't respond to increase their inventory level. As contrasted with 256M SDRAM, the premium of contract price over spot price has getting shorten. 1H Aug. 256M SDRAM contract price was $4.54 vs. spot price was $4.26, with disparity of 9%; 1HOct 256M SDRAM contract price was $4.89 vs. spot price was $4.77, with disparity of 3% (Chart II).

We see the DDR spot price's turnaround as a short-term pick-up and the price will keep slightly up in the coming week. If the demand remains slow, little support to keep the DDR spot price upturn trend going in November and December. We expect a narrower premium of 256M DDR contract price over 256M spot price; either a lower contract price or a higher spot price for 1H November.