Spot Market rebound expected to be short-lived

The DRAM spot price rebounded from the earlier declines seen during the beginning of last week. Between the 9/26 and 10/1 period, although the DDR2 512Mb 667MHz declined 2.03% to USD 1.45, the DDR2 512Mb eTT climbed from USD 1.17 to USD 1.23, up by 5.13%. The spot price rebound can be attributed to two main reasons—(1) Prices bottoming up from the previous low of USD 1.10. (2) Due to the severe price decline, Hynix announced on 9/28 it has temporarily stopped supplying chips to the spot market. Nevertheless, with the DDR2 512Mb eTT daily average price now very near the daily low of the DDR2 512Mb 667MHz, if the major chip prices do not increase, it will hamper further price increases in the spot market.

For the contract market, in the period between late September and early October, prices for some 1GB modules have been settled at USD 25, resulting in significant price pressures on the contract price for 1HOct. Despite the recent spot price rebound, contract prices remain in the down trend. Amid the current hot PC season, OEMs have no intention of acquiring more DRAMs, as inventory levels remain adequate. Thus, for 1HOct, contract prices are expected to drop further, where the level of decline is expected to be higher than September.

Due to a fire at Matsushita's battery plant, which brought production to a halt, it has further exacerbated the already tight NB battery cell supply. Although the extent of the damage is still being accessed, NB shipments for November and December will be affected to a certain degree. In addition to a likely oversupply problem in the DRAM industry for 4Q07, the battery plant incident could further dampen the overall DRAM demand. Furthermore, with the traditional PC selling season ending soon, DRAMeXchange believes the recent spot price rebound will be shortlived.

Enhanced security and faster transfer speeds set to spur UFD demand; NAND Flash average contract price declines 2~15% in 2HSep

As CPU processing speeds become increasingly faster, several approaches have been employed in improving the data transfer bottleneck between CPU & internal storage devices. This includes the PCI Express 2.0 Turbo memory technology, SATA SSD, Vista-designed Hybrid HDD and other NAND Flash cache solutions. By taking into account the 10Gbps and above transfer speed of the cable Ethernet and forthcoming optical fiber network, Intel, Microsoft, HP, NXP, NEC& TI recently unveiled plans in introducing the USB 3.0 interface in improving the data transfer bottleneck  between the CPU and external I/O peripherals. These new solutions will help boost the internal & external data transfer efficiency of the PC system. The faster speed rate will improve from USB 2.0's 480M bps to 4G bps and above. The USB3.0 specifications are expected to be completed by early 2008. Products that employ the new interface will begin hitting the market in early 2009 at the soonest. By that time, in addition to remaining compatible with the USB2.0 standard, the NAND Flash-based UFD, MP3 & DV and other NAND Flash-related peripherals will enjoy significantly shorter transfer time for downloading video data. Such products will be more easily accepted in the high-speed broadband era. In addition, digital content protection and data security improvements of UFD and memory cards are also being improved by  relevant software and hardware solutions. UFD & memory card vendors can thus gradually enter the content storage device market. Meanwhile, with the NAND Flash price per bit declining each year, DRAMeXchange projects UFDs, which are used as one of the removable storage devices for Vista-based PCs, will become more appealing to consumers beginning from 2008. DRAMeXchange believes UFDs will account for 16.5% of the NAND Flash demand in 2008.

Separately, the NAND Flash  average contract price slipped by 2~15% in 2HSep, where the mainstream 8Gb&16Gb MLC saw the largest price drop. The decline reflects the expected higher chip output via the new 5X nm manufacturing node by major suppliers in 4Q07. Further manufacturing costdowns and more chip production will begin to kick in beginning from Oct07. Meanwhile, the price drop can also be attributed to the sales promotion during the 3Q07 quarterly end and ongoing National Day holidays in China. SLCs have been experiencing a smaller price decline than the MLC, due to a scaled back production. In the wake of persisting price drops and governments around the world working together in stabilizing the international financial and economic environment, it should help stimulate the demand for NAND Flash-related products in 4Q07, along with developing new business opportunities in new emerging markets. Therefore, October is still considered a NAND Flash inventory pull-in plateau period in the traditionally strong seasonality of Q4. Due to the already large NAND Flash price drops in September beforehand, DRAMeXchange believes chances for larger declines are not high in the short term.

Finally, a comparison of the listed NAND Flash prices from the last session on September 26 and October 1 is shown below. Spot prices of the 1Gb SLC chip climbed from US$3.71 to US$3.73, a 0.5% increase. For 2Gb SLC, they fell 3.2% to US$5.83; 4G SLC down 1.0% to US$8.31; 4Gb MLC down 5.4% to US$5.90; 8Gb SLC up 3.4% to US$16.20. Meanwhile, the 8Gb MLC dropped from US$6.68 to US$6.39, down by 4.3%. The 16Gb SLC was up 8.0% to US$27.92; 16Gb MLC down 2.0% to US$13.40; 32Gb MLC down 0.3% to US$26.77.