January 17, 2008

Memory Update: Surviving the DRAM market

The theme for the first half of 2008 is surviving the DRAM market. As the new year begins, look for DRAM manufacturers to strive for stability during the first quarter. The DRAM market is already at an all-time low and, generally, Q1 tends to be slow from a production standpoint. Converge believes that current spot-market pricing is where the market will remain during the next three months, plus or minus a percentage point. There is not much room for further decline, and if this occurs we can expect to lose one of the larger DRAM manufacturers to lack of funding. At today’s pricing, $8.50 for 512M DDR2 and $16 to $16.50 for 1GIG DDR2, there is no money being made.

If the contract and spot-market prices can remain stable over the next three months, the market should slowly rebound in Q2. We cautiously use the word rebound because any sustained increase in market price, even if small, would be considered a rebound. In the past, activity during the month of March has usually been a good indicator as to how Q2 will unfold from an open-market perspective. March tends to be a strong production month as forecasts for the year begin to come to fruition.

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