By Joyce Yang, Marketing Intelligence Team, DRAMeXchange

DRAM mainstream chip, DDR 256Mb 32Mbx8 400MHz has continually traded up 3% from $2.64 to $2.72 from July 12 to July 19. During the same period, eTT(UTT) chips have shown stronger uptrend momentum as the major eTT supplier still has not released any to its major customers and distributors in the spot market last week. 256Mb 32Mbx8 eTT chip was up 4.8% from $2.49 to $2.61. Usually, the price gap between eTT and major brand average price ( for example, Hynix ) is around $0.20, the price gap will extend to $0.30 during the downtrend or shrink to $0.10 during the uptrend, sometimes, eTT prices can be traded higher than major brand average price if there's overheating demand in spot market. Thus, the pricing trend of eTT chips can be a leading indicator of DRAM spot prices.

We forecast DDR 256Mb 32Mbx8 average spot price to go up continually and reach $2.80 soon next week or so.

PC shipment up 6% to 7% MoM in June

Taiwan tier-one motherboard makers have reported an upside surprise on June shipments. The growth on aggregate shipments from top four makers showed stronger than the tier-two motherboard makers as they have been consolidating market share from tier-two makers. The top four motherboard makers' June shipment has reached 7.9 million units, the growth is mainly driven by the upside from Asustek and Microstar.For notebook shipment, Taiwan ODM, Compal and Quanta also reported an upside on shipment though the ASP trended down with fierce competition.

We've observed demand for DRAM has turned stronger since the second half of June. We believe the stronger demand is contributed by the better than expected PC shipment in June as most PC OEMs still hold lean inventory in June and have a stable or slightly up content per box ( memory installed per PC system ) policy. Some major PC OEMs have felt a tighter supply of DDR SDRAM than DDR2 SDRAM since the second half of June.

DRAM supply update : DRAM capacity allocation to NAND Flash and reduction in DDR2 ramp up

We estimate DRAM supply shortage will enlarge in August as DRAM supply bit growth constrained by more capacity allocating to NAND Flash. Especially for one Korean DRAM maker which has switched one Chong-Ju DRAM fab which accounts 20% - 25% of its total DRAM capacity to NAND Flash only since the second quarter. Besides, the USA and European DRAM makers also have solid plan to double their NAND Flash capacity starting the third quarter. We believe the capacity transition to NAND Flash is a good strategy for DRAM makers to reduce their risk exposure on DRAM pricing volatility.

With concern of Intel 915 chipset shortage and slower than expected demand of DDR2, some DRAM makers have slowed their DDR2 ramping up plan or reduced their DDR2 capacity to match the PC OEMs customers' need for DDR1. Besides, DDR2 premium over DDR1 have shank to zero to most PC OEMs customers and to channel customers, DRAM makers' profitability on DDR chips will be better than DDR2 chips as DDR2 cost is still higher than DDR1. DDR2's die size is about 5% bigger than DDR, thus, DDR2 is to yield less gross dies in the same size wafer even DDR2 yield rate matures. Besides, according to our update with Taiwan backend companies last week, DDR2 512Mb still requires over 1000 seconds in testing time and may reduce to 700-800 seconds - the average testing time for DDR 512Mb, until the fourth quarter of 2005. Furthermore, the FBGA package of DDR2 in 512Mb is around $0.10 higher than DDR1 TSOP package in 512Mb.

We estimate the DDR2 average penetration in PC and server/ workstation to be below 45% in December 2005 according to DRAM makers' adjustment on capacity ramp up and allocation on DDR and DDR2.