DDR 256Mb 32Mx8 drifted sideways at the range $6.45 to $6.55

After advancing to the $6.50 range on April 5, the market spent the remainder of the week not doing much other than drifting sideways in a relatively tight trading range. There's 1% correction on April 8 and flat trading on April 9. The prices recovered loss on April 12 and advanced bit higher today. The moderately positive sentiment, as exhibited by the market's ability to maintain its standing in positive territory was considered being supported by the upside of 2H April contract prices and a surprising news of unexpected loss involved with DRAM makers such as Winbond, Powerchip and ProMOS due to Taiwan Hsinchu Science-based Industrial Park sudden power shut-down for half an hour on April 10. As these DRAM makers estimated, the power shut-down caused half day production volume which is around 2% of monthly production output gone and the impact will be mainly on the May output.

Volume continues to run at a noticeably lighter clip than the levels observed last week, speaking to a lack of conviction to the move higher on the part of the participants. Yes, it's encouraging that the market is able to maintain its standing in positive territory. However, if no catalyst to stimulate the market momentum mover higher, the DDR 32Mx8 might be near the peak in the near term, we believe.

Expectation on increased production output and shipment on supply

More good news were released by the supply sides according to our regular checks. Samsung has allocated 1 million more on DDR chips to Taiwan market this month compared to March as said that its yield rate has been improved on 0.10um. Another source indicated that Samsung seems satisfied with current pricing and showed conservative view on the upside. Infineon has experienced a testing problem on 0.11um process in the beginning of March and led a reduction of 1H April shipment. The 2H April shipment is supposed to pick up as the problem resolved. Powerchip announced it will increase the 300mm DDR SDRAM wafer in from current 22K to 30K this month and the output for June will increase in line with this 8K more input.

200mm/300mm wafer value of DDR 256Mb 32Mx8 v.s. Flash 1G

From the beginning of this year, we see DDR spot prices soaring from the $3.6 to $3.7 range to the current $6.45 to t$6.55 range. In contrast , Nand flash spot prices are trending down from $33 to current $21. Some researchers and marketers have raised their concerns whether the increasing profit margin generated by DDR SDRAM and the decreasing margin yielded by Nand Flash would make suppliers shift Nand flash production to DRAM, increasing the level of supply. According to our estimate, the wafer values for 200mm/300mm DDR 256Mb 32Mx8 and Nand flash 1G will be close to each other as $5.0 for DDR 32Mx8 and $20 for Nand flash 1G. ( Note: the cost difference is not counted yet for above statement. Major cost difference will be on backend and that of Nand flash is a bit higher ). However, the shift of production from Nand flash to DRAM or back may take two months for the output to the market. DRAM makers will put the future demand, their marketing strategies, sales forces and long term planning into consideration rather than rushing the shift by the pricing performance.

Moore 's Law : IC cost 30% down by year

"Moore's Law basically says in the electronics industry that you can double the number of transistors in an integrated circuit or equivalently double the processing power in an integrated circuit by a factor of two every 18 months or so…."In past years, Moore 's law has well applied to DRAM designing rule and driven the cost down around 30% yearly. The Chart I shows our research on the DRAM makers' full loaded cost and indicates the DRAM makers are in great profit at current high spot and contract prices.

2H April contract prices v.s. PC OEMs procurement activities

According to our checks, 2H April contract prices are likely to set higher to the $40 to $42 range as most DRAM makers intend to move the contract prices up concerning a high premium existing between spot prices and contract prices. DRAM makers hold a positive view on the demand from PC OEMs even in the slow season, the second quarter. We believe the upside of 2H April contract prices may support the DDR 32Mx8 spot prices sustain above $6.0 in April and a correction might be seen at the end of April or May if no further catalyst to support or boost the spot prices up.

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