Fundamental Supporting
We gave the fundamental supporting reasons at last week's
market situation update; those are just the basic foundation to support the
reasons why price can raise up. We plus the slow wafer out which will decline
the supply in coming season. The slow wafer out and decline output will come
from the results of holiday vacations' day off, forcing employee days off,
regular manufactory's overhaul, companies control wafer output, product-mix
relocation.
Negotiation power shifting
We all know DRAM market is a market
which can be easily manipulated by few big players. We have observed the negotiation
power shifting from the buyer side to seller side at the end of last week.
At the beginning there were few buyers who began to place big orders at previous
low price, the market react as the price hitting the bottom and pre-stock
demand picking up, the buyers began to chase the price up. Seller side took
control price from that point. Major DRAM companies began to control the shipment
and kept raising price. Now price is in the turning-point the buyers stop
to chase and watch out very carefully how the trend will go, so do the sellers.
Turning-point?
Why we think it is a turning-point? At level of $1.6 to $2
for 128Mb SDRAM is still above some cost-non -efficient companies' variable
cost, but below some cost-effective companies' variable cost. Some companies
can stop cash burning, but some will keep cash burning. For cost-effective
companies they probably begin to take all orders at this price if they don't
expect great demand in the near future.
Price keeps current level?
But market think price will hold around current level until
contract price deals done. We suspect the spot price will keep higher than
current contract price level for major sellers to negotiate the better price
for coming second half of contract deals which actually contribute the most
volume to the companies.
