October 15, 2007

Memory Update

The DRAM market is not showing any signs of a rebound after prices reached a new low at the end of September. The spot market was flooded with available parts, but there were not many buyers – even with pricing well below direct. In contrast, we observed prices for a 1 GB/667 desktop drop to $21 and for a 512 MB/667 to $13. We now believe that pricing concerns no longer drive the current state of the DRAM market. Converge believes the PC OEMs are still trying to utilize their higher-priced inventory, and although spot-market pricing is tempting, demand is not strong enough to warrant open-market buys at this time. Adding to the market woes is the desire to no longer hold inventory, which is keeping plenty of supply in the distribution channels.

China’s Golden Week holidays had no overall impact on pricing. In fact, the complete opposite occurred and the market moved at a crawl. These are all bad signs for the DRAM market for the remainder of the year. Fortunately, October is a long selling month. Although Converge does not believe there will be any significant upside in the final three months, based upon the time of the year, we hope there will be some positive market signals before the major holidays are upon us.

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