DRAM demand supported by Hot NB sales in US and Europe

A weak DRAM spot price is seen, where the DXI increased from 4651 to 4655. In the contract market, as PC OEMs are experiencing better-than-expected sales, computer products will continue to be delivered until month's end. Demand is expected to remain relatively strong.

With the Christmas holidays approaching, minimal transactions are seen in the DRAM spot market, prompting a modest downtrend in the DDR and DDR2 spot prices. DDR2 512Mb 667MHz and DDR2 e TT chips dropped respectively to $6.56 and $5.67. DDR chips continued to experience a slight slowdown, where DDR 512MB slipped to $4.87.

With the two largest US based OEM makers locked in an intense market share battle, the duo have initiated large-scale price cuts in Q4 to attract consumers. NB sales which are now mostly Vista capable, have been better-than-expected in the European and US markets. Thus, product delivery will continue until the end of December. However, amid the tight supply of DRAM modules, memory makers must deliver their goods within the specified time frame.

Evidently, DRAM makers are striving to increase the production by enhancing the manufacturing process. Employment of the 80 nm manufacturing process for DDR2 products continues to grow, where Korean suppliers are currently at the forefront. DRAMeXchange estimates the 80nm process will account for 6.6% of the total DRAM output in Q4. On a different note, with the DDR2 667MHz emerging as the mainstream product, it is believed to take up roughly 65% of the contract market. As the output of DDR2 800MHz is lower, its contract price is relatively higher. It will still take some time before it can become the market's new mainstream product.

For DRAM makers to enter into the supply chain of PC OEMs, it takes at least 2-4 months. Thus, despite the DRAM production ramp up in Q4, not all of the modules can be supplied to the contract market, which explains the current conditions in the contract and spot market. For next year, Taiwan based DRAM makers must try to develop new strategies in boosting their shipments to the contract market.

Unabated NAND Flash demand despite Christmas approaches

Although most industry players have already piled up sufficient NAND Flash stock for the soon coming Christmas, DRAMeXchange observes solid market transaction, especially in Asia. Year-end financial pressure should weigh on transaction volume over the coming weeks but its influence over pricing remain uncertain yet.

Only a few OEMs and distributors at Europe and US sourced for NAND Flash recently. Demand from Asia, especially from the Greater China region, on the other hand, does not whittle down due to Christmas. DRAMeXchange thereby foresees stable demand to persist through Chinese New Year (mid-Feb) and Asia region should continue outgrowing US and Europe in terms of requested volume.

Prices of low-density NAND Flash chips, including both 1Gb and 2Gb, rebounded on Dec15 while high-density chips (4Gb and above) maintained stable with only minimal price drop being observed. Since most MP3 player makers had already secured their stocks in contract quotes during early Dec and handset OEMs still demand for considerable amount of low-density chips for bundle memory cards, demand for high-density comes relatively weak than low-density parts currently.

Projecting transaction throughout the next 1-2 weeks, DRAMeXchange believes year-end financial burden among industry players should still weigh on industry players to minimize their inventory. We expect seeing some players to deal with downstream customers with considerable amount of NAND Flash during year-end. Overall transaction should swell up but associated price impact is still subject to observation.

Reviewing price trend during Dec 12-18, price of 1Gb was the only density part that enjoyed sequential gain of 4%. Price of 4Gb dropped the most at US$6.57 while 2Gb dropped 0.2% to US$4.11; 4G 0.7% to US$10.79 and 16Gb 1.2% to US$21.55.