Smuggle-fighting and 70nm transition jointly spur DRAM spot prices

DRAMeXchange observes DRAM spot price rebound last week channels'  pre stock activities amid smuggle-fighting measures in China, as well as prolonged cycle time on 70nm output.

DDR2 eTT part saw a sequential gain of 27.5% and closed at US$2.04 on June 20, while branded 512Mb DDR2 64Mx8 also saw a mild growth to US$2.21 in the same period.

Some channel distributors in Shenzhen, who aggressively pre stock amid the smuggling-fighting measures in southern China, is one of the major causes for the price rebound. Since China imposes 17% VAT on imported goods, some China-based channel distributors often smuggle DRAM chips from Hong Kong in order to avoid the VAT cost. Yet, the strict smuggling-fighting measures recently prompted them to aggressively source DRAM chips from spot market under shortage concern, thus boosting prices accordingly.

Prolonged production cycle time when transiting to 70nm production is the other reason for the price rebound. DRAMeXchange sees the prolonged production cycle time among Taiwan DRAM makers is reflected in May and June's reduced output. Although the impact over volume is not critical, industry players are still concern about potential output cut at spot market, given that Taiwan chipmakers mostly supply their parts to the spot market. We expect seeing a smoothen transition on 70nm among Taiwan makers in July and August.

Projecting DRAM contract price in 2HJun, DRAMeXchange sees room for growth along with obvious demand pick-up. Contract price for DDR2 667MHz 512MB should stay in the range of US$15-16, similar to that of 1HJun's. In light of the upcoming PC seasonality in 2H07, some PC OEMs who ink long-term contracts with chipmakers, also helped holding prices firm. If the DRAM spot prices sustain its upward trend throughout June, we anticipate that DRAM contract price to see persistent upward trend in July as well.

NAND Flash marks its step forward in PC market

Amid the strong promotion from industry players, SSDs or solid-state drives are becoming more and more widespread in the market this year. Loads of vendors have rolled out a variety of SSDs, ranging from 8GB to 128GB and presenting in different interfaces like SATA, UATA, IDE, USB, PCI, etc. Contrasting to conventional HDD (hard disk drive), SSD is still a relatively new storage media concept for the masses. Although SSDs have already been applied in military and industrial sectors for quite some time now, it has been unable to migrate to the PC area, as the manufacturing costs of the SSD are much higher than the HDD.

Industry watchers began to question when the SSD would be applied in notebooks, as Samsung and Sony started unveiling respective 8GB/16GB SSD-equipped UMPC (ultra-mobile PC) last year. A quick look of several high-end NBs equipped with the 32GB/64GB SSDs unveiled from vendors like Dell, Fujitsu, Sony and Toshiba over the past several months hints that penetration of SSD was indeed taking place.

Shared features of the listed NBs are: lightness (three of the listed four weighted less than 1kg), power saving efficiency, strong shock resistance and faster boot-up time (refers to both startup and sleep mode boot up modes). Yet, consumers have to pay a price to enjoy these advantages – most of these NBs come with a retail price of over US$2,000 right now. As such price tag is too high for general consumers, these NBs will be targeting the business market during the initial stage.

DRAMeXchange anticipates seeing more NB vendors to join the race and roll out their SSD-equipped NB lineup in 2H07, marking NAND Flash's extending influence over PC market. Whether or not SSD is going to take off very much depends on the derived performance leap, as well as a fair pricing for general consumers.

On a separate note, NAND Flash spot price trend in the week June 11-15 showed that low-density parts swung from gain to loss on a weekly basis while the growth of high-density ones (except for 16Gb) weakened. Price of 16Gb is the only density of chip that saw its sequential growth enlarged. Price of 1Gb dropped 3.6% at US$2.39 and 2Gb 3.3% at US$3.22. Price of 4Gb, 8Gb and 16Gb all trended up with a respective gain of 2.1%, 2.1% and 6.4% at US$5.39, US$8.25 and US$17.59.