June 28, 2007

How long will the DRAM market stay at bottom?

We are finally starting to see some stability in the DRAM market. Although there were a lot of parts on the street for month end deals, pricing remained fairly stable. It appears we have hit bottom. The question now is how long does the market stay at bottom? It doesn’t look like there will be any rebound until late July at the earliest. Usually by then the market starts gaining some momentum as various OEMs begin their fall and winter builds. That said, there are still too many parts in the channel for any significant turnaround in the immediate future.

Industry analysts are split as to when the market will rebound. Many feel the adjustments the DRAM manufacturers are making in response to the oversupply / lack of demand will be enough to stimulate the market by the middle of Q3. Others feel the demand will remain below expectations which means the market will not turn around until early next year. Based upon our channel checks each week, we feel the market will not turn around until early next year. Usually when the market falls as fast and as hard as it did it takes some time for things to recover and regain sizable momentum. Since the second half of 2006 saw record highs for spot market pricing and huge gaps between contract and the open market, OEMs will not be quick to use the spot market unless a pricing or delivery advantage can be obtained. After the pounding the market has taken over the last five months stability is a step in the right direction.

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