Most DRAM makers have offered DDR 256MB 1H June contract prices $0.50 higher since mid June. However, some OEMs buyers have delayed placing orders in a way to keep the prices stable. After negotiation for several days, most buyers have set the contract prices unchanged. DRAM makers mentioned though they've set the prices flat for most, they’ve applied $0.50 higher for some upside or urgent orders. DRAM makers insist that they will raise July contract prices much higher in a projection of higher demand and upside orders from their OEM customers. They are also positive the contract prices to go up toward $26 for DDR256MB DIMM, which is $3.0 in terms of 256Mb 32Mbx8 chip.

Though most DRAM contract buyers believe DRAM contract prices have reached bottom and may go up soon while approaching hot season. They also believe there's no serious shortage in the second half of 2005. Thus, their procurement quantity of DRAM is still based on their market demand and prefer to deal the prices following the market situation. Without a stronger inventory build demand, DRAM makers found it uneasy to move the prices up quickly.

DRAM contract prices have hanged near bottom in the range of $20 to $22 for two months. Again, DRAM makers have failed to raise the prices in June as buyers still keep their inventory lean. Besides, the weak DRAM spot pricing performance in past week played a negative factor in contract pricing negotiation. Though DRAM makers have received some upside or urgent orders from buyers, the increasing volume won’t be strong enough to support the prices up. In projection of a higher demand in July, DRAM makers intend to raise the contract prices up 5% to 10% in July according to sources.

DDR2 demand to increase soon as premium disappear

As most DRAM makers aggressively to allocate more capacity to DDR2 production, DDR2 production output MoM bit growth in April and May was 14% ad 11.4% respectively and the portion of total DRAM output was up to 25.4% in May 2005 from 23.5% in April 2005. According to PC OEMs, there’s almost no premium for DDR2 512MB 400MHz over DDR 512MB 400MHz. However, there’s still 5% to 10% premium on DDR2 512MB 533MHz over DDR 512MB 400MHz. DRAM makers and OEMs buyers all believe the premium will disappear soon in the second of this year and DDR2 demand will spur accordingly. Currently, except Dell, some PC OEMs have DDR2 installed in PC system around 30%, some even have a lower portion of 10% to 20%. We estimate the average DDR2 application rate will increase to 35% to 40% in the third quarter and up to 50% to 60% in the fourth quarter.