DDR stays strong; influx of supply discourages DDR2 prices

Recent price trend of DDR still stay relatively strong than DDR2 as marketers still encounter difficulties to source for sufficient DDR stock. The decline of available DDR supply at the spot market thus boosted price up.

DDR2, on the other hand, reports a divergent price trend at the spot and contract market. Supply is still in short at contract market while stocks are flooding at the spot market. DRAMeXchange believes demand is put on hold as those memory module makers and distributors who are optimistic for 2H outlook had piled up inventory. The influx of DDR2 from those DRAM makers who are not concentrate on contract market sales aggravate the case.

DXI rebounded slightly from 3,347 to 3,368. Price of eTT (UTT) DDR 256Mb was spurred to the same level as branded DDR at US$2.40 while DDR 512Mb 64Mbx8 400MHz had also boosted to US$4.87. Prices of DDR2 512Mb 64Mbx8 533MHz dipped to US$4.63 while the same-spec eTT (UTT) also lost by similar rate and closed at US$3.58.

DDR2 contract prices see uptick from Aug, 10%-20% shortage expected in Sep

DRAMeXchange projects bullish outlook for DDR2 in 3Q on anticipated contract price up. DDR should also sustain its price stability in the same period amid the drop of demand and supply. We believe that DDR2 should see a price rebound in 2HJul at the earliest as shortage is inevitable as we previously stated. Demand should continue growing strong as industry players should start preparing for the upcoming Windows new OS Vista in 2H06.

DRAM contract price for 1HJul has not been settled yet as the two leading US-based PC system makers are still having their two-day long Independent Day holiday. Prior to the anticipated settlement on Jul6-7, DRAMeXchange observes that buyers and sellers have not reach any consensus yet, though both parties do see tightening supply. The upward price trend of DDR2 from Feb only weakened in Jun, which encourages PC system makers look for 3-5% price cut in 1HJul.

Although DRAM makers are aware that supply will fall short of demand in 3Q, they are likely to make concession on 1HJul pricing and either maintain the price level or rise prices slightly in 2HJul. DRAMeXchange expects DRAM contract prices to trend upward from Aug. Despite DDR2 512MB 533MHz should expose to price drop pressure this month on the migration to higher frequency and higher priced 667MHz, we estimate the price drop of overall DDR2 should be limited.

On the sideline of anticipated contract price up, some DRAM makers estimate that shortage of DDR2 may enlarge up to 20% in Sept and supplies convincing reason for the upcoming price up. The top-two PC system makers in US whom are preparing for the quarterly end financial reports during late Jul start procuring stocks to prepare for shipment from Jun. This pre stock act should extend through Aug and encourage prices of DDR2 to go up further.

While demand is swelling up, DRAM content per box should grow along at the meantime.DRAMeXchange does not see any discouraging factors to influence the growth of DDR2 content per box despite the upcoming price up. Since 512MB DRAM is now a "basic" memory density for mainstream system, the new memory-thirst Vista, should jointly spur demand. Solid demand for DDR should also persist through Sep and the drop of both supply and demand may stabilize prices until then.

The last week of June did not bring any encouraging news for marketers in the NAND Flash spot market with all components prices continued drop, though the drop rate had been weaken in compare with the third week.

Prices of 2Gb, 4Gb and 8Gb NAND stayed relatively strong to resist price drop last week, thanks to strong demand in compare with other densities.DRAMeXchange observes that supply of 4Gb and 8Gb encountered temporal shortage issue amid some distributors/suppliers' inventory adjustment, thus boosted short-lived price up.

We notice that Samsung and Hynix offer competitive packages for Taiwan customers on 1Gb, 4Gb and 8Gb goods amid their inventory concerns. The attractive prices of such components thus helped constraining the price fall pressure somehow. Since downstream Taiwan customers usually procure larger amount of stocks in the second half of each month than the first half and the suppliers are subject to inventory pressure during month end, discounts were then proposed.

Lenovo sets its future desktop (DT) deployment goal on strengthened functionalities and home entertainment enhancement in order to counter against the shrinking average selling prices (ASPs) pressure from notebook (NBs). The leading China-based system maker aims to integrate all multimedia content facilities/peripherals (like TV, sound system, etc.) with DT and bring the entire system go online with enriched interaction capability. Lenovo anticipates that its goal will bring fruity DT sales and differentiate from NBs.

Despite the aggressive goal on DT deployment, Lenovo still mainly focuses on NB currently. The company aims to boost its NB production proportion by over 10-20pp to exceed 40%. The fact that NB occupies a significant proportion in PC sales is inevitable- in mature PC market like Japan, the penetration of NB had reached as high as over 60%. Lenovo, however, only has a 20-30% shipment proportion to NB to overall PC sales and this ratio may even reported at 15-25% at some regions.

In order to drive its NB sales, Lenovo rolled out a low-priced $4,999 RMB NB this year to fulfill the growing NB demand from general consumers. Lenovo, which regards enterprises as another key market segment, will also introduce high-end and entry-level models to preserve its brand value as well as to grow market share.

Although loads of PC, consumer electronics (CE) and software makers/developers tap into the digital home sector on the anticipated business potential offered, associated PC or CE solutions/platforms are still under the early development stage. Consumers, on the other hand, still need further education on the substantial benefits that digital home may bring to daily life. The other breakthrough that industry makers have to undergo is consumers' unfamiliarity on applications installation and maintenance.

Even though standards are being ironed out by the Digital Living Room Alliance (DLRA), network components from one vendor--TVs, digital video recorders (DVRs), set-top boxes, digital media servers, and the various types of players-- still have not reach any consensus on an industry-wide standard on respective interest concern.

Statistics from Parks Associates show that digital home applications manufacturers still have to devote more efforts to educate and grow the concept among consumers at the meantime.

The research show that most consumers could not overcome the connectivity issue between PC and other applications, some other consumers are still found operation difficulties that the growing complicated applications bring.

Over 60% of consumers expect digital home applications attain automatic software tools to manage hardware operations. One third of consumers said they are willing to pay extra service fee to solve any operation barriers that they may encounter during operation.

Even the mentioned barriers are removed, consumers will not replace their present PC/CE applications with brand new system but will rather base the core at the present system and seek for extension. They will rather spend efforts to seek for content providers whom are able to supply value-added service, the report highlighted.

Microsoft's MediaCenter, HP's EPC, Intel's VIIV platform and Sony's game consoles are some of the typical examples of new "Digital home" concept applications.