Most DRAM market players showed limited interest as Chinese lunar new year approaches. DDR chips trades slightly down from January 24 to January 30 2006. DDR 256Mb 32Mx8 400MHz and DDR 512Mb 64Mbx8 400MHz both went down 1.3% from $2.3 to $2.27 and from $4.32 to $4.26 respectively while DDR eTT (UTT) went down 3.8% from $2.08 to $2.0. DDR2 has shown stronger pricing performance due to a shortage in spot market. Both DDR2 512Mb 533MHz major brands and non-major- brand went up 1% from $5.07 to $5.12 and $4.2 to $4.24 respectively.

Shrinking DRAM production output preserves strong DRAM prices in Q1 2006

Both DRAM spot and contract prices trended downward from late Sep05 and rebounded until early Dec05. Take the mainstream DRAM 256Mb 32Mbx8 for example, its spot price has dropped by 22.2% in two months in 2005 (from US$2.56 on Oct3 to US$1.99 on Dec7) but rebounded by 17.6% to US$2.34 during early Jan05. Here are list of chief factors affecting DRAM price trend in 4Q05.

First, Samsung grew graphic DRAM and mobile DRAM output at the expense of commodity DRAM (both DDR and DDR2) production. It has also transited its 12-inch Fab 12 for complete NAND production and raised the NAND Flash portion at its 8-inch fab Fab 9 in 4Q05.

Second, Christmas demand has been prolonged with demand continues to remain strong at Asian markets due to the upcoming Chinese New Year. PC OEMs, at the meantime, whom do not accumulate much inventory during fall 2005 due to the shrinking memory prices (from Sep05), will not trim down their procurement amount in 1Q06.

In January, DRAM procurement amount remains strong along with the ease of Intel chipset shortage since 2HDec. As DRAM makers have reduced their DDR2 production output since Nov05, a shortage of DDR2, as well as tight supply of DDR are expected to persist through late Feb06. The anticipated wafer output should only takes effect after two months of production.

DRAMeXchange projects the positive DRAM spot and contract price momentums to maintain through the first quarter. DRAM contract prices are expected to increased over 10% in February due to Samsung’s cutting on commodity DRAM portion and DDR/DDR2 shortage should extend to March, we believe. Samsung plans to its commodity DRAM portion to less than 50% in terms of wafer , not only because of 18% ASP drop on commodity DRAM but also a strong need on graphic / mobile as Samsung is the major GDDR3 vendor to Microsoft XBOX360 and Sony PS3. We believe DRAM demand to shrink in the second quarter for weak seasonality, however, DRAM spot prices/contract prices may have chances to remain stable or under a slight 5-10% price drop risk for low supply bit growth.