PC OEMs ink long-term supply deal to ensure stable supply

The relatively sharp fall of DDR spot prices had dragged DXI at 4,496 points last week. DDR2 transaction was limited as majority of supply has reserved to PC OEMs. Contract market, on the other hand, should capable to maintain its stability through 1Q07 on the observed long-term supply deal that inked among industry players.

Since some non PB free DDR chips that were made by Korean makers circulated at the spot market, prices of DDR 512Mb were reduced by 4.5% sequentially to US$5.27 where DDR 256Mb were also reduced by 1.3% to US$2.95. Spot prices of DDR2 also dropped at the spot market, despite demand still persists. Since contract customers still consume the majority of DDR2 supply, transaction was mute when distributors and module makers are still unable to secure stocks from the spot market. Price of DDR2 512Mb 667MHz still hold firm at US$6.26 but non-branded eTT (uTT) chips were slipped to US$5.43.

Overall speaking, the downward DDR price trend is driven by demand rather than supply, though supply of DDR is actually declining among chipmakers. Intel, that aims to ramp up its DDR2-support 945/946 chipset proportion in expense of DDR-support 865 chipset, has whittled down penetration rate of DDR-supported chipsets at DTs from 3Q's 34% to the current 22%. DDR DIMMs are now barely found at the contract market and lots of chipmakers stop offering DDR quotations. Starting from 4Q06, DDR is now the so-called "legacy" product as we expected. DRAMeXchange expects DDR to replace SDRAM at some applications with prices to stabilize from 2007.

After experiencing the stronger-than-expected price growth at the contract market in 2HNov, DRAM should maintain its stable price trend in Dec along with the improving supply status. Tight supply should be eased because: 1, some DRAM makers should start shipping 80nm DDR2 after gaining validation soon; 2, some PC OEMs may cancel some of their orders after realizing shipments could not catch up for Christmas.

Irritated by the DRAM shortage during Oct and Nov, we now seeing some PC OEMs have inked long term supply contract through 1Q07 in order to ensure sufficient supply. Disregard we project PC shipments to decline on seasonality factor in 1Q07, DRAM contract prices should not see any critical fluctuation due to the mentioned supply agreement. There may be even chances to witness DRAM contract price trend beating its historical pattern in 1Q07.

MP3-orient handsets- the ultimate NAND Flash consumer in 2007

Assuming each unit of MP3-orient handset requires an avg. memory capacity of 2GB NAND Flash, DRAMeXchange estimates a minimum of 1.6b units of NAND Flash (in 1Gb equiv.) will be required to fulfill demand in 2007. Learning from the red-hot sales record of both Nokia and Sony Ericsson's MP3-orient handsets, we project MP3-rich handset shipments that are about to hit a minimum of 100m will serve as a vital NAND Flash consumer accordingly in 2007.

Driven by the wave that Apple's iPod creates, many handset vendors start rolling out more music-orient handsets over the past 1-2 years to draw consumers' attention. Both Nokia and SonyEricsson's sales record of MP3-orient handsets proved this statement, with either vendor have its foothold further strengthened or rankings being advanced.

SonyEricsson could be described as the best example to illustrate how the catalyst that MP3-orient handsets may bring. Thanks to the buoyant sales of its Walkman W-series handsets, SonyEricsson, that has accumulated 15m unit sales of W-series handsets, succeeds to have its ranking advanced from the 5th to 4th position from 2Q06 in terms of market share.

Consolidating with Ericsson in 2001, Sony manipulates its leading position on AV file management (both hard- and soft-ware) by incorporating its own-develop "Walkman" engine to the new entity's mid-range to high-end handset lineup. Although Sony is not as competitive as Apple in terms of MP3 player market share, the success consolidation of MP3 player with handset shows how flourish the sales record could be.

The latest MP3-orient handset from SonyEricsson' W-series handset is W950i. This high-end 3G-support handset is embedded with 4GB of NAND Flash memory capacity and we believe the strong sales of W950i should contribute significantly to NAND Flash capacity consumption.

Nokia, as the top handset vendor, also have its foothold further secured from strong music-rich handset sales. Sales amount of multimedia-orient high-end N-series handset has exceeded 10m units up to date. The Finnish handset maker starts tapping into the MP3-handset market via introducing "XpressMusic"-brand. The key features of XpressMusic-handsets are the user-friendly shortkeys for music playing and interface shifting.

Up to 3Q06, there are now three XpressMusic available: 3250, 5200 and 5300. All of these handsets are bundled with microSD card with 256-512Mb of NAND Flash capacity. Of which, 5200 and 5300 could support a memory capacity up to 2GB while 3200 up to 1GB.

In related news, DRAMeXchange records constant NAND Flash price correction last week. Price drops for higher density NAND Flash were relatively obvious with 16Gb dropped 6.7% and 8Gb 4% on a sequential basis. Prices of 1Gb to 4Gb felt in the range of 3-4% with price of 1Gb dropped 4.1% to US$2.56; 2Gb 3.8% to US$4.60 and 4Gb 3.1% to US$7.54.