According to sources, Samsung has released a significant amount of DDR SDRAM and flash parts to the spot and contract markets in the past week, prompting some market players to dump Samsung original modules in the spot market and dragging down the prices to a range between $38.5 and $39.2.

In Hong Kong's market, only a small quantity of Hynix DDR 333/266 MHz parts circulated in the market. However, the prices still dropped below the official price of $4.50 due to a fall of the prices of UTT parts to $4.25 resulted from dumping by Chinese traders.

As the summer promotion failed to reach expected targets and consumer demand in the traditionally high season in the third quarter appears to be softer than expected due to the Asian Cup soccer tournament from 17 July to 7 August in China, some Chinese PC OEMs and module makers have revised down their forecast of shipment growth in the third quarter.

Even though we remain our projection of 15% growth on PC shipments in Q304 as orders from OEMs to meet back-to-school demand are expected to surface soon, the growth of memory installed per system could be revised down due to the delay of Intel's DDR2 chipsets and the Grantsdale recall.

As for supply, most DRAM makers are expanding their 300mm capacity to increase output. Samsung will ramp up its line 13, while Powerchip is expanding its 300mm capacity, aiming to reach 40K wafer-in by the end of 2004. Inotera, a JV of Infineon and Nanya Tech, is about to churn out 24K wafer-in in October according to the company. We estimate total 300mm wafer-ins of all DRAM makers in the third quarter will increase 120K comparing to that of the second quarter.

Besides the planned capacity expansion, Nanya Tech. and ProMOS said their Q3 production growth will be mainly driven by migration to advanced 0.11um/0.12um technology. According to our "Market Intelligence", we estimate DRAM output to grow 16% in the third quarter comparing to the previous quarter.
In conclusion, we project a limited upside for DDR prices in the third quarter despite expectations of improved demand in the traditionally hot season. However, we see dim prospects of contract prices in 1H August to head further south as the inventory level of most PC OEMs is relatively low at about 2-3 weeks, and DRAM makers are unlikely to accept lower prices according to our survey.

List 1 DRAM spot prices