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【Market View】DDR prices rocketed by PC OEM’s promotions on content per PC


Published Jan.13 2004,18:27 PM (GMT+8)

DDR prices rocketed by PC OEM’s promotions on content per PC
 
Content per PC promotion by PC OEM limited supply to spot market
 
DRAM pricing performance has disappointed many DRAM marketers in November and December. The shortage of PC panels and hard drives limited the demand and the high prices of PC panels has also constrained the PC OEMs budget ratio on DRAM. After passing the peak season, DDR 256MB contract prices have dropped dramatically from $42 to $32 from 2H November to 1H January by PC OEMs’ aggressive bottoming their target prices. On the last run of negotiation in 1H January, many DRAM makers had hard time to accept PC OEMs’ aggressive cutting 8% further down since $3.5 is quite near their cost, however, DRAM makers also worry if PC OEMs shank their procurement would increase their inventory pressure, hence, they had to take PC OEMs cutting unwillingly.  
 
In the 12/30/2003 weekly report, we have mentioned that contract prices have been down to $32 which is certainly quite low for DRAM makers with limited profit. However, it is quite good for PC OEMs. Per our research, at the beginning of January, PC OEMs like Dell and HPQ have launched promotion programs on increasing the DRAM capacity installed in the PC systems from 256MB to 512MB on PC pricing ranging $700 to $1,200 (without monitor) which increased their demand and further limit DRAM makers’ supply to spot market. Dell and HPQ try to stimulate PC shipments by increasing content per PC since December sales numbers were not good, partly caused by the heavy storm in North America.
 
After new year holiday, Europe market came back to restock their inventory and some marketers tried to accumulate their stock preparing for the Chinese New Year. Suddenly, they found out the supply was limited. The modules houses took most of stocks released to spot market by DRAM makers. Channels and traders started to get the stocks as many as  they can and the followed speculation further pushed the prices soar and even cross over the contract prices. ( Chart I )
 
However, the market momentum is little soft today. Some traders tried to take profit and get cash in before Chinese New Year. We are conservative on the DDR pricing trend for next week since the speculation did go pretty high and the prices needs support by the real demand. We project the spot prices may go softer by the profit taking and cooled down speculation, and whether the prices will surge further after Chinese New Year, the procurement volume from PC OEMs will be key. Many marketers are concerned the next run contract prices negotiation whether it will be pulled up by the strong spot prices, however, it seems tough to raise contract prices to match high spot prices. It will be very good performance for DRAM makers to raise the contract prices according to our survey.
 
 
 
                                                        Chart 1
 
 
    
 
                                                                             Chart 2
 
 
 
 
                                                          Chart 3
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