DDR 256Mb 32Mx8 333MHz past yearly record high to $6.47

“Up up up past the yearly high; Up up up to the historical high…….”

 

10% up on DDR 256MB 1H April contract prices and strong-still PC OEMs procurement activities have spurred the module houses and channels marketers to sweep in the DDR SDRAM 32Mx8 as many as they can get for inventory built-up and likely, for speculation. Strong market momentum supported by extremely optimistic view for near term spot pricing performance has boosted DDR SDRAM 32Mx8 on a steep upward trend. For this past week, the price for DDR 256Mb 32Mx8 400/333/266 MHz jumped 22% - 23% from $5.29, $5.29 and $5.25 on March 30 to $6.54, $6.47 and $6.43 on April 6. As of April 5, the prices shot up 10% within 2 hours of the Asian market open and the upward momentum is mainly driven by the pulling-up strength in Chinese market as well as USA market since the prices have been trader higher on Saturday, April 4.

 

On March 31, procurement activities from some module houses to accumulate their inventory shown stronger and pushed the DDR 32Mx8 up 4% further to $5.53. Non-brand modules were trading up with strong UTT’s pricing. Vendors limited their offering to spot market again and allocated the parts to long term or good relationship customers only. During the daily transactions, the DRAM buyers suffer while to build satisfactory inventory level with acceptable prices. Besides, when they shopped around the market and turned to vendors who offered the low prices, usually the parts were gone or the vendors raised the prices again. We estimate the inventory level in most channel marketers and modules houses is around one week and most likely, their purchasing cost is above $5, considering the average price for DDR 32Mx8 333MHz for March is $4.95. Today, UTT has been trades up to $6.30. We note that as the prices surge with tight supply, UTT ( untested ) gets more important with its steady supply when other major DRAM makers shank their supply to the spot market with strong demand from PC OEMs. In past two week, UTT has little premium with major brand memory chips, usually UTT is 20 cent to 30 cent below the major parts. 

 

The bullish bias was rooted in the belief that the supply to the spot market will remain tight and the 2H April contract prices is likely to move up to support the spot prices sustain at high level. We reiterated our bullish outlook for the DRAM market for the year. The semiconductor recovery is clearly seen and the corporate replacement demand is likely to jump for the second half of the year. Even the supply is also expected to increase by more capacities ramp up in 300mm and better yield rate on 0.11um as approaching to Q3 and Q4. However, the growth of the demand is estimated to be stronger than the increase of the supply.

 

 

To manage the risk involved with DRAM price-volatility, DRAM procurement managers have to adjust their inventory level not only by the seasonal demand but also, maybe more important, the pricing trend. To accumulate inventory at relative low prices and be sure the inventory is sufficient in high demand season are major duties of DRAM procurement managers. Usually, PC OEMs are to control the memory modules budget ratio of total system( not including monitor) to be 5% to 10%. As DRAM cost down around 30% by year, memory modules cost has been well controlled around 4% to 6% in past two years. With shortage concerns and high cost pressure, PC OEMs will reduce the memory installed per PC system. According to our “Market Intelligence – supply and demand model”, 512MB installed ratio is around 57% in desktop and 50% in notebook. Assuming the ratio to be reduced to 30% in desktop and notebook, the DDR 32Mx8 ( for desktop )consumption could decrease 13% and DDR 256Mb 16Mx16 / 512Mb 32Mx16 ( for notebook ) could decrease around 10%. However, we have also to consider the impact by PC OEMs strategic inventory built . Normally, PC OEMs hold 10 to 14 day inventory during the slow season, Q1/Q2, and will increase to 5 – 6 weeks in hot season ,Q3/Q4. We may put a simple calculation here, if PC OEMs try to accumulate their inventory for two more weeks in three months, that means 16% demand increase for each month. If so, we believe that’s the key to drive the DDR 32Mx8 prices to pierce its highs.