By Joyce Yang, Marketing Intelligence Team, DRAMeXchange

The 1 May fire on ASE Chungli, Taiwan facility had inspired a strong buying action in Chinese retailed market, eTT(UTT) parts surged $0.10 to $2.25 in Asian market on 3 May, however, the pricing momentum didn't keep long and it dropped to $2.15 in the late afternoon.

DDR 256Mb 32Mbx8 400/333/266 MHz drifted in a narrow range in past week, from $2.41, $2.36, $2.38 on 3 May to $2.38, $2.41 and $2.39 on 10 May morning market. The transaction volume was sluggish as China and Japan are in golden week holiday, most marketers stayed aside or checked pricing only.

In SDRAM spot market, the transactions remained in lackluster. SDRAM 4Mx16 has been slowly dropped from $1.20 to $1.01 and SDRAM has been stabilized in a range of $0.50 and $0.45 in past six months. Only Hynix SDRAM 8Mx16 and 16Mx16 parts got higher buying interest, however, the prices were unchanged near $3.65 and $2.10 in past 3 months.

Regarding Nand flash market, sources indicated Samsung has kept 1H May contract prices stable at $8, $16, $30 and $56.5 for 1Gb, 2Gb, 4Gb and 8Gb respectively. We have heard Hynix flash parts rebounding in the spot market followed an increasing buying activities in Chinese market.

Impact of mass production on DDR2

According to DRAMeXchange "Market Intelligence", Samsung, Elpida and Infineon has DDR2 production output over 30% of total DRAM output in April and Hynix, Micron and Nanya has DDR2 output over 20% in their DRAM product mix. Overall, the DDR2 has accounted around 23% of April DRAM output. Samsung has announced its DDR2 to reach 38% in the fourth quarter, and Infineon, Hynix and Nanya have announced their DDR2 to climb over 50% near the end of 2005. DRAMeXchange expect the DDR2 portion will reach 30% near the end of the second quarter and about 45% to the end of 2005.

As most DRAM makers made aggressive ramping up in DDR2, DDR bit growth decreased 2.6% in April MoM while DDR2 bit growth increased 14% in the same period. Though some major PC OEMs have plans to increase the installation ratio of DDR2 in PC systems, we believe some phenomenon may happen during the transition process.

First, DDR2 prices may cross over below DDR prices if DDR2 demand doesn't catch up the DDR2 supply. We probably will see a short term shortage of DDR parts and oversupply of DDR2 parts near the end of the second quarter or early third quarter. Currently, most DRAM makers still offer DDR2 with 5% to 10% price premium over DDR to their customers. We expect the DDR2 prices will get close to DDR2 soon as some DRAM makers have DDR2 inventory pressure. If most PC OEMs slow their installation of DDR2 , the oversupply on DDR2 while a shortage on DDR would cause the DDR2 prices traded below DDR.

DRAM prices bottom out?

The low of DDR 256MB UDIMM 1H May contract prices keep at $20 as most DRAM makers were reluctant to sell at prices below $20. We have heard that some PC OEMs started to increase their purchasing volume or to make a long term purchasing deal to lock in the current low prices. We expect the DRAM spot and contract prices to drift at narrow range in May and early June and may move up toward $3.0 in the third quarter.