2H April DDR 256MB contract prices increased 12% -13%

According to our checks with DRAM makers and PC OEMs, 2H April DDR 256MB contract prices rose 12% - 13% from the previous $38 to $41 range to the $43-$46 range which is around $5.12 to $5.5 in terms of DDR 256Mb 32Mx8 chip. Most DRAM makers mentioned the demand from OEM customers are too strong to fulfill, hence push them to increase the prices further again. Even though PC OEMs are not comfortable with the surging prices, however most of them worry more about the might-be more serious shortage for the third and fourth quarters and forced to take the booked quantity and maintain strong forecast to DRAM makers to ensure the volume allocated to them in shortage seasons. However, the rising contract prices didn't boost the DDR 32Mx8 spot prices up as expected.

DDR 256Mb 32Mx8 about to cross down over the rising contract prices

After hitting the $6.50 highs, market upward momentum turned slower. The news about a sudden half-hour power-shut down in Hsinchu science-based industrial park only gave the prices a one-day lift and another news telling more DDR SDRAM dumped to the spot market by Samsung and Hynix seemed having a stronger impact on the market. DDR 256Mb 32Mx8 400MHz/333MHz/266MHz slipped 12%-13%from $6.47, $6.39 and $6.34on April 13 to $5.63, $5.58 and $5.58 today.

Market indicated that the selling was driven by Chinese marketers with concerns of the sustenance of spot pricing upward trend. Some marketers were suspicious of this dropping which may be dragged down by some buyers who intend to trade in the parts with lower prices. Anyway, the prices slip lower as conviction on the part of buyers and sellers is pretty weak in past week. Buyers showed little interest to take the parts at high levels and sellers were forced to offer lower prices to locate the real demand.Volume was anemic, demonstrating a lack of conviction on the part of traders.

DDR 256Mb 32Mx8 spot prices may drift at the $5.30 to $5.70 range

Many are confusing about the still-softening pricing performance on DDR 32Mx8 in spot market after a dramatic increase on DDR 32Mx8 2H contract prices. We would like to put a note that the participants in contract market and spot market hold different market trading strategies and views on the market. In contract market, the major buyers, PC OEMs, give first priority to ensuring sufficient components to meet the shipment requirement rather than speculation. Thus, PC OEMs are to build their inventory in July or August prior to hot shopping season or even earlier if there's raising concerns on rising prices or shortage. Like SARS burst out last year, PC OEMs had increased their inventory in April with worries the could-be supply constraint in Chinese market. However, the module houses and channel marketers are more cautious on inventory control as the prices reach high levels. To speculators, the upside is limited for speculation and to module houses, the risk is getting higher to build inventory at high levels. Besides, the system integrators, the major buyers for modules houses, may not benefit as much as PC OEMs if corporate replacement demand shows stronger. Hence, module houses are not so motivated to increase their inventory as approaching to the seasonal slow months, "desperate May and poor June".

The chart I below indicates the slipping DDR 32Mx8 spot prices is about to have a "dead-cross" with rising contract prices. We don't see a positive trading momentum showing in spot market to bounce the prices up. According to our market sense by testing the trading temperature, we don't expect the current trading activities in spot market to boost the prices to previous highs of $6.50. We believe the chance is high for DDR 32Mx8 drifting at the $5.30 to $ 5.70 range in the near term.

Chart 1

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