Press Center

DRAMeXchange indicates DRAM price continues to weaken despite production cutback


3 October 2008 Semiconductors

Taipei, October 1, 2008 --- DRAM makers such as PSC, Elpida, and Hynix have separately announced production cutbacks on September 8th , 9th , and 18th. If the cutbacks proceed as scheduled, we expect to see a reduction in worldwide DRAM production by 5 to 6% around end of October to November. Spot market was encouraged - rose from 1.32 USD on September 8th to 1.4 USD on September 10th for an increase of 6% - initially when the first cutback was announced. However, the rebound was short-lived; by September 11th, price on spot market began to fall again. After the last announcement of cutback from Hynix, spot price failed to continue the rise with average price increasing slightly by 0.01 USD then weakened by the continued slow demand. Overall, spot market demand continued to weaken in September in spite of announcements of the production cutback.

Contract price fell precipitously in 2H September with average selling price of 1GB SO-DIMM 667MHz dropping by 15.6% - the biggest decline seen in the past 6 months. Economic recession has begun to spread from US to Europe and emerging markets in 3Q08. Branded PC makers with higher exposure in European market continued to lower their shipment target and reduced their DRAM purchase. In addition, previously accumulated DRAM inventory level at these branded PC makers continued to remain relatively high, which resulted in even lower demand in the contract market. Buyers now are with stronger bargaining power. Taken together, contract price continued to fall under these unfavorable conditions. In addition, given the economic condition, several branded PC makers have turned more conservative about the original, much hoped for Christmas shopping season in Q4 which added even more downward pressure for the October and November DRAM contract price.

Figure: Contract price (in USD) from May 2008 - Sept. 2008



Given that the effects from the production cutbacks will not materialize roughly for another month, short term contract and spot prices is unlikely to increase given the present weak demand. Although short term price is supported at current level given that cash cost of a single DDR2 1Gb die is roughly 1.3 to 1.5 USD, unless other DRAM makers follow suit and cut back production, DRAM price will continue to fall with the production cost improvement or the weakening demand. Supply reduction is the only way to see a recovery of DRAM price given the current DRAM market.


Previous Article
Faltering confidence in consumer and corporate segment drags down TV panel prices further in October, says WitsView
Next Article
WitsView sees IT panel prices stabilizing in the near-term