1Gb DDR2 led the fall; Black Friday sales beat expectation implies re-stocks activities ahead

Weak pricing persisted as expected in the DRAM spot market in the week Nov 19-26 due to considerable amount of inventory, with branded 1Gb parts posted the sharpest fall on a sequential basis, according to DRAMeXchange. While further price down is projected in the spot market, the research firm foresees that contract price trend in 1H Dec will still subject to downward pressure. Regardless of how price trends, the firm noted that better-than-expected sales record in Black Friday (Nov 23) implies re-stocks activities ahead, which is a rare positive news for memory module houses by 2008.

Prices of DDR2 maintained weak in the spot market as expected, said DRAMeXchange. Price of 512Mb DDR2 eTT dropped by 11.8% on week to US$0.82 on Nov 26. Prices of the higher-density 1Gb eTT and branded parts, dropped by 13.6% and 18.2% respectively, at US$1.65 and US$2.01 in the same period. Poor demand, coupled with faster-than-expected price drop of the same-specification eTT component and weakness in contract pricing, were the major reasons for the sharp price fall of branded 1Gb parts, said DRAMeXchange. Price of 512Mb eTT part that drops below US$0.80 mark is very likely, the research firm warned.

In the contract market, price of 1GB DDR2 667 module was averaged at US$20 in 2H Nov, representing a 10% sequential drop. Citing present market condition, the acute downward price pressure as seen in spot market and minimal procurement incentive among OEMs are major forces dragging prices down, DRAMeXchange said. As Christmas approaches, OEMs, who generally should have low incentive to re-stock, should prolong the price weakness in 1H Dec, the firm added.

Recalling sales after the day of Thanksgiving, the so-called Black Friday, DRAMeXchange observes that sales actually beat expectation by growing 22% YoY, despite the fact that macroeconomic environment is still lulled by the sub-prime shadows and high crude oil price trend. This sales record sparks competition among DRAM module makers onwards. In contrast to OEMs, who already had their procurement high season in 4Q ended in October, module houses may have their last orders prior to Christmas, to be prolonged through mid December, DRAMeXchange noted.

Given that channels are reluctant to pile up their inventory level on price volatility, the better-than-expected sales record as seen in Black Friday hints that re-stocking is likely, DRAMeXchange noted. When memory module prices have hit new low, most channels spur sales via providing free memory upgrade will spur sales of corresponding DRAM also. How DRAM module makers grab this final opportunity to push sales will be critical, the firm remarked.

Thanksgiving successfully spur consumption; 2H Nov NAND Flash contract price flat

Thanksgiving Day on Nov 22 marks the final round of consumption upturn through year-end of 2007 in the US. Misted by the sub-prime issues in 3Q07, industry watchers, who previous guided a pessimistic outlook for 4Q07 sales, stayed tuned for sales trend in Thanksgiving Day and the Black Friday. To date, US press generally reported sales beating expectations with YoY growth recorded. This positive news temporarily eased worries for a lackluster sales trend in US in 4Q07.

Despite purchasing power at emerging markets rapidly growing in recent years, US consumers are still the dominant demand drivers for the IT industry, given that the country is the world’s largest economy. Thanksgiving and the Christmas are the two most crucial shopping seasons in the US, and the sales records will greatly impact supply chain’s 1Q08 inventory trend. 

NAND Flash applications (handsets, digital cameras, USB Flash drives and MP3 players) focus a great deal on consumers. Based on the preliminary Thanksgiving sales data, NAND flash consumption so far takes a good beginning for a healthy status for suppliers. But the key question is whether demand will be sustainable by vendors’ promotion campaigns in the coming month at both US and other regions.

NAND Flash contract price roughly stayed flat due to the increasing chip demand in 2H Nov. As the inventories of downstream makers reduced in 1H Nov., some makers started to stock up chips for the year-end holiday sales after mid-Nov. In light of the larger accumulated price drop starting from early Sep, the market expects the NAND Flash contract price to stabilize in the short term, especially as the year-end holiday sales approaches. However; if the year-end holiday sales is better than original market expectations, the NAND Flash contract price could mildly decline in the coming traditional slack season.

In the SLC segment, prices of 1Gb dropped by 6.3% to US$3.26; 2Gb 8% to US$4.36 and 4Gb 1.1% to US$6.56. In the MLC segment, 4Gb was the only specification that posted a sequential appreciation of 1.7% to US$4.29. For the other density parts, 8Gb dropped by 9.7% to US$4.57; 16Gb 5.4% to US$27.32; 16Gb 1.2% to US$9.8 and 32Gb 9.3% to US$19.01.