February 17, 2010

Indications point to an early uptick in the memory market

Converge Memory Update.

DDR3 demand expected to strain supply channel
Activity in the DDR3 market has shown signs of slowing down during the last two to three weeks. Converge attributes the slowdown to the time of the year and the arrival of the Chinese New Year holiday. Generally, February can be a slow month for activity as the box builders begin to get an idea of how their upcoming forecasts are going to materialize. Due to the slowdown, pricing has retreated a bit, especially in the notebook market. The 2 GB DDR3 SO-DIMM has dropped to the $47-$48 range for the first time in three months. Also, 2 GB DDR3 desktop modules have dropped to the high $40s as product has become available in the spot market. Converge believes DDR3 activity will resume in the first half of March and pricing will begin to climb back into the $50+ range for all 2 GB modules.

March has historically been a busy month for memory as box builders begin to fulfill their forecasts. Industry analysts are predicting the memory market to start taking off in the second half of 2010, but Converge believes the uptick in spot market activity will begin sooner. Many of the box builders are reporting an earlier-than-expected migration to DDR3, and that will put a bigger strain on the supply channel.

Another example of the early migration to DDR3 is the steep decline in DDR2 spot pricing. The spot price for 2 GB DDR2 modules has dropped from a high of $54 to $40 for both desktops and notebooks. There's plenty of supply, and we are seeing large quantities of excess for the first time in almost a year. We don't believe the DDR2 market will drop too much further as second-tier box builders take advantage of the low pricing.

The SDRAM market continues to experience serious shortages. Micron in particular is on the verge of allocation on most SDRAM product, and the spot market continues to rise at a rapid pace for all Micron SDRAM. For those using only Micron material, it may be a good time to start qualifying other manufacturers.

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