Low volume transactions on the spot market

Low-volume transactions on Spot market

While prices have been spiralling down without on low transaction volume, the spot market is showing sluggish sentiment. Although motherboard shipments keep MoM growth, PC shipments don't necessarily show similar numbers - main reason is that PC OEMS are restocking the new model motherboards in the channels, preparing for peak season. Nevertheless, the spot markets are not being affected by the continuing growth rate of motherboard shipments, but rather they are dropping down because of tepid demand and accelerating DRAM output (as we mentioned last week).

Contract prices didn't help spot prices.

2H Sep. contract prices were mostly flat over 1H of Sep. or just slightly up at the low range. It's appears it is getting increasingly more difficult to raise contract prices with PC OEM companies. We expect that the contract price will similarly be difficult to rise in Oct. and could begin to trend flat or down slightly. As the trend seems to be downward rather than upward, spot prices should not get any stimulation from relatively higher contract prices.

Weak spot prices will probably bring down contract next month

Reversing our prediction on contract prices in Oct., it now appears that contract prices will be pulled down by a continuing drop in spot prices. However, tier 1 notebook companies' order forecasts remain strong until Nov., so some DDR 256Mb (16Mx16), should continue to remain at a good price (as long as forecasts don't become revised down).

No replenishment demand before China's long vacation

China has a long one week National Holiday coming up. As the China market is also anticipating downtrending prices, there is no replenishment inventory demand before the holiday arrives.

During this week, we probably will begin to see the accelerating inventory adjustment by DRAM makers, module makers, distributors and channel brokers/traders. Spot prices should continue to trade down, but we are not at the main price dropping stage yet.