July 23, 2007

The Memory Market is Starting to Rebound

Spot market pricing has rebounded significantly in the last 4 weeks. A lot of the activity and a rise in price had to do with the anti-smuggling rules put in place by China. The spot market pricing for DDR2 went up significantly in the second half of June. 512M/667 modules went from $15 to $20 in less than a week. 1GIG/667 modules went from $32 to $40 in roughly the same amount of time. Both densities have since stabilized at these current levels. Both are also above contract price even after a meaningful increase of roughly 12% from the DRAM manufacturers for the first half of July. All of this being said, there are signs of brokers pulling in parts for the first time in six months from all three regions. Many are banking on another increase in contract for the second half of July and strong seasonal demand. It looks like another increase in contract is for certain based upon the feedback from the box builders, but how big the percentage will be this time remains to be seen.

The NAND flash market could have an impact on the DRAM supply over the next several months. NAND flash continues to be in high demand, especially for 4G and 8G. Spot market pricing has almost doubled over the last two months for both densities. Look for the major DRAM manufacturers to take full advantage of the NAND market while they can. Ultimately this should cause some interruptions into the DDR2 supply channels over the next few months but we don’t think it will lead into any full blown shortages.

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