July 16, 2008

Converge Memory Update

There appears to be turbulence once again in the DRAM market. June was considered a disappointment, with expectations of an increase of more than 10% in contract prices, while the actual result was roughly 5%.

July is shaping up to be a struggle, as the DRAM manufacturers were unable to achieve any price increases, resulting in a flat first half of July. The spot market has been quiet and inventory is once again starting to build up. 1GB 800 desktop modules have dropped from a high of $23 in early June to just under $20 thus far in July. Open-market vendors are listening to offers, but there are no signs of any buyers. It appears that for the second year in a row, we could be looking at a lackluster back-to-school build season.

These results do not come as a surprise, as there is no activity driving demand in the market. Rumors and predictions of a DRAM recovery in 2008 have been overstated. The global economy is showing signs of increased weakness, and corporate IT spending is limited. If market forces do not change soon, we expect pricing to decline further. In the meantime, depending on activity in July, we could see potential inventory dumping for the first time since February.

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