February 21, 2008

Don't be fooled by the sudden rise in spot market pricing for DRAM

Don’t be fooled by the sudden rise in spot market pricing for DRAM memory over the last four weeks. Although the market has spiked roughly 20%–25% on the staple 64x8 PC667 chips, there have been no signs of any module activity in the spot market. The 64x8 PC667 chips rose from $0.85 to $1.10 over the past month, but they have since settled at roughly a $1.00 price point. With the rise in 64x8 PC667 pricing, module pricing also rose — not due to demand, but due to the cost of goods to assemble. In fact, there is still plenty of 1 GIG PC667 module inventory available in the channels. The 1 GIG modules rose from $17 to $20–$21 during the time span already mentioned but also retreated to an $18.50 price point. Various industry analysts believe the rise in price was due to a slight reduction in production from the DRAM manufacturers and spot market buys needed for builds before the Chinese New Year. As the holiday approached, pricing quickly dropped by about 10%.

None of this activity should be considered a rebound, as the market has not been able to sustain the increase in price. Converge still believes we are several months away from a true, sustainable rebound in the DRAM market. It is still too early to forecast an exact timetable as to when the market will gain some meaningful momentum, but we are hoping that by the end of March we will see some signs of life.

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  1. So what kind of price trend can we expect for the DRAM market. Elpida has already announced increasing prices for its memory chips. Will the other manufacturer follow suit?

  2. Samsung has already mentioned they will try to raise some prices as well, BUT this will only work if all the DRAM manufacturers stay together and maintain course. If we come to the end of April or May and the market remains slow, more than likely one of the manufacturers will panic and dump supply at lower than market pricing, erasing any gains made.