Swell of DDR2 eTT supply justifies earlier price rebound as short-lived

Price of 512Mb eTT, that closed at US$1.05 on October 29 after a short-lived rebound, should head south towards US$1 point in near term, according to DRAMeXchange. While price volatility is still severe in the spot market, magnitude of price fluctuation in the contract market is relatively stable. DRAMeXchange projects that only limited price drop will be seen at the contract market during late 2007.

Following a short-lived price rebound of eTT chips to US$1.17 as recorded on October 22, the closed price of US$1.05 on October 29 marked a 10.2% sequential drop on a weekly basis. Swell of eTT chips supply, conservative consumption among marketers, intensifying financial pressure during the later part of each month, as well as the fresh eTT supply that did not ease completely, are the major factors for the downward price trend, DRAMeXchange explained.

Contrasting to the price rally as seen in the spot market, price of branded chips was not affected much with only a 5.8% drop recorded. Citing present inventory level at memory module makers and PC makers, DRAMeXchange expects a further price drop in DRAM contract price in November, but the magnitude should be weaker thereafter.

Amid the downward price trend as seen last week, memory module makers are still maintaining their shipments stable. Overall demand from Europe and US is still beating other regions whereas consumption from China area does not resume in a powerful manner following the end of the recent Communist Congress. Most Taiwan memory module houses are still striving hard to ease their piled up inventory, DRAMeXchange noted.

DRAMeXchange estimates that PC shipments should rise by 6% YoY in 4Q07 due to the sub-prime woes and demand weakness. Where DRAM makers seem reaching no consensus for expansion trim, DRAM contract price may subject to further drop in November. But as the magnitude of drop is already strong in October, DRAM makers who tend more conservative about price adjustment should limit the drop in December.

Regarding DRAM capex trend, DRAMeXchange estimates that DRAM makers should have their capex trims by about 20-25% YoY in FY08, meaning expansion on 12-inch wafer fabrication will slow down. In Taiwan, the key fresh contributors will be Nanya, ProMOS and Rexchip. Whereas for overseas vendors, fresh capacity will mainly come from 70nm or more advanced nodes. Although the two Korea giants noted that they have no expansion plan for FY08, Samsung still guides a 70% YoY bit growth. DRAMeXchange foresees that global DRAM supply bit growth to be 50% in FY08, versus the demand bit growth of 40% in the same period.

iPod sales in line with expectation in 3Q; NAND Flash contract price declines 0~10% in 2HOct.

According to the latest earnings release from Apple, although the company posted a mild QoQ iPod shipments growth of only 4% in 3Q07 at 10.2mn units, YoY growth was 17%, in comparison with the 8.73mn units sold in the same period last year. The shipments record through 3Q07 suggests that Apple managed to have its iPod shipment growth to stay in the 20% range on a YoY basis. For such a gadget that is already maturing in the CE market, the shipment record highlights the high popularity of Apple's products among the masses.

Owning to the hot season impact, MP3/PMP always sees its shipments peak during the fourth quarter, as evidenced in the past shipment trend of Apple. Besides the traditional seasonality impact, the smart marketing strategy and innovative new iPod product launch should also guarantee a promising shipments trend for Apple. In order to bid for more market share gain, Apple chooses to add memory density in its new iPod Nano (NAND Flash-based) and iPod Classic (HDD based) without adjusting price.

The new iPod that supports touch screen, iPod Touch, at the meantime, also raises eyebrows. iPod Touch could be described as an iPhone without telephone functions. It distinguishes itself from the market, as there are no similar devices available from Apple's rivals at the moment, implying Apple has a power catalyst to its iPod sales in 4Q07. In general, as seen in previous years, DRAMeXchange believes the iPod sales in 4Q07 will perform strongly, where sales will likely double when compared with the preceding respective three quarters. We also expect other electronic makers to unveil several new high-density MP3 & Fashion phones with different functions. These developments will help further augment the future applications of NAND Flash.

2HOctober NAND Flash contract prices declined roughly by 0-10%, as the intention of purchasing more chips weakens. Meanwhile, downstream clients are aggressively cutting the prices of their end-products, in order to further lower their current inventory levels before the forthcoming year-end hot season. Thus, for October, the pull-in effect from downstream clients has not been as strong. 8Gb & above MLC chips declined more sharply than other NAND Flash chips, due to an increased production output via the 5X nm process technology from major NAND Flash suppliers. However, the market expects the inventory level & year-end demand of downstream clients to improve in November. The NAND Flash contract price thus could become more stable in November. 

NAND Flash spot price recap for Oct 22-29

SLC segment: 4Gb posted the largest sequential drop at 4.5% and closed at US$6.83on October 29; followed by the 3.8% drop in 2Gb that closed at US$5.06 and the 2.1% drop in 8Gb part that closed at US$13.56; and the mere 0.2% drop on 16Gb part that closed at US$27.77 on the same day. 1Gb part is the only specification that posted a sequential appreciation of 2.5% and closed at US$3.68.

MLC segment: Only 8Gb managed to maintain quote flat on a sequential basis and closed at US$4.66 on October 29. 32Gb part posted the largest drop of 8.6% drop and closed at US$22.2; followed by 7.3% drop as seen in 16Gb that closed at US$9.68; and 6.7% drop in 4Gb that closed at US$4.34.