Despite the still- strong demand in contract market, the demand in spot market seems to shrink dramatically and market momentum exhibited lackluster as traders and channel distributors show little interest in speculative trading amid ongoing downtrend.

Volume is anemic and is much lighter than the levels prior to 10% dropping on April 14, speaking to the participants' lack of conviction... Distributors and agents claim they are still far away from reaching their monthly sales target even near the month-end. Demand in European market is relatively weak in past week and stronger demand shown in Chinese market on April 22 to pick spot prices up a bit.

In respect of the pricing performance, DDR 32Mx8 400/333/266 MHz drifted 3% to 5% lower to $5.42, $5.30 and $5.28 of today's close. Elixir 256MB modules were trading from $44.5 down to $39 and UTT was slipping from $5.6 to $5.10. While the 2H contract prices of DDR 256MB were up 12% from the $38 to $41 range to the $43 to $46 range.

In fact, the DDR SDRAM supply to the spot market is still tight. The news indicated that Samsung and Hynix dumped more parts to spot market was denied by Samsung's and Hynix's distributors. As now, Hynix hasn't quoted the offering prices to spot channels yet, not sure Hynix is holding the parts or no parts to release to spot market.

However, the news did affect the marketers' concerns on overheating spot prices and further drained the speculating demand in spot market. The major buyers in spot market including module houses and traders stepped aside to watch a next move or tried to cut the prices as low as they could if they were to trade in some parts.

Infineon started 0.11um pilot run from 3Q 2003 and experienced a designing defect on 0.11um mask. Hence, it applied a new mask design in April and caused mass production schedule delayed to late July. Nanya's 0.11um migration is also based on Infineon's technology, thus, Nanya has to modify the photo mask design and initiated the ramp up on 0.11um as well.

ProMOS and Nanya are aiming on higher exposure to OEM contract market, allocating around 70% of their total output to their OEM customers. As the spot prices turned soft in line with shrinking demand, ProMOS and Nanya tech announced they would decrease their output allocation ratio to spot market to meet the stronger demand in contract market.

Powerchip's Fab12 A has reached 22.5K wafers per month and the capacity will grow to 30K wafer per month by mid 2004 and to 35K wafer per month by Q4 2004. In addition, Powerchip will begin its transition to 0.11um from its mature 0.13um in mid 2004. The Fab 12A capacity will reserve 5K to 10K to AG AND flash for Renesas in 2H 2004.

Despite the getting higher contract prices for DDR 256MB , the demand from PC OEMs remains strong, according to DRAM makers. ProMOS indicated its inventory in OEM customers' hubs couldn't sustain at required level of 2 weeks. OEMs customers took out the inventory soon after it put more parts in the hubs.

We expect 1H May contract to remain at current highs even we still see downtrend pricing pressure in spot market. DDR 256Mb 32Mx8 average prices may drift with a slight negative bias as demand remains sluggish. However, seeing the still-tight supply in spot market and expecting an adjusted lower spot ratio by DRAM makers as prices keep going down, we estimate the spot prices can sustain above $5.0 range in short term.

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