By Joyce Yang

After suffering the sharp down of DRAM spot and contract prices in the second quarter, most DRAM makers intend to raise the 1H July contract price for DDR 256MB up in the range of $1.0 to $1.50, around 5% to 7% and increase DDR2 modules prices up around 3% to 5% according to our checking with DRAM makers and PC OEMs in past days. Though most PC OEMs agree the contract prices will be set higher this time, they still try to fix the prices increasing with $0.50 only, the worse, no more than $1.0 for 256MB modules.

Two Korean DRAM makers have commented their DRAM supply is getting tighter and mention to raise the 1H July contract prices around 5% to 10%. Other DRAM makers also hold the same positive views in belief of stronger demand in the third quarter. However, PC OEMs comment they don’t see a shortage concern in the third quarter and believe contract prices should go up smoothly in line with seasonality demand. PC OEMs expect DDR256MB contract prices to go up $0.50 in each negotiation term – if it does follow this rate, there will be $4.0 up to the second half of October 2005 from 1H July 2005. According to our understanding, we believe DRAM makers also hold the same projection that DDR 256MB contract prices will peak in the range of $24 to $26, however, they will try to fasten the increasing and hope the prices reach peak in September and stay high till November 2005.

Though PC OEMs are still in negotiation of 1H July contract prices with DRAM makers, we estimate the 1H July contract prices will most likely close in the range of $20.50 to $23 ( or $21 to $23) for DDR 256MB and $44 to $49 for DDR2 512MB as DDR2 modules’ premium over DDR modules continue to shrink.

DRAM spot prices traded slight higher today

The spot price for DRAM mainstream chip, DDR 256Mb 32Mbx8 400/333 MHz, remained unchanged in past week and trends slightly up $0.8% to $2.43 from $2.41 in Asian market today. Most traders and distributors in the spot market are unwilling to release their inventory by hearing some good news about DRAM positive trend in the near future. eTT(UTT) chips also increase up to $2.30 today. However, we also heard a few marketers prepare to cash in their DRAM inventory which they accumulated in the low price weeks ago. Thus, we believe DRAM spot prices will be traded in the range of $2.40 to $2.50 with limited transactions. We estimate a limited upside in the spot prices for next two week because we’ve seen some module houses have accumulated some inventory on hand and demand in spot market has not turned strong yet.

We expect DRAM spot prices to turn stronger when PC OEMs get more aggressive in building their inventory for preparing the hot season and then squeeze the supply to spot market. We expect DRAM spot pricing momentum to turn stronger near the end of July or in August 2005.