Both DRAM and NAND Flash contract prices fall by 10% in 1HDec; further declines may occur in 2HDec, according to DRAMeXchange

Taipei December 9, 2008 --DRAM chip price still can't fight against the weak spot market demand, although the drop range was smaller than the previous week, further declines may occur. Last week (Dec 2nd to Dec 8th), the DDR2 1Gb eTT chip price dropped from 0.67 USD to 0.61 USD, with the drop range of 9%. The DDR2 667 MHz 1Gb also dropped from 0.64 USD to 0.61 USD.

Due to lack of cash inflow for the DRAM vendors and the output reduction has been taking into consideration to decrease loss. With the month end window dressing finishing, market pressure has slightly decreased, but the total inventory level of the spot market is still high. With the global recession and the weak Christmas Holiday demand, the time period of consuming inventory will be elongated. The recovery of demand in 1H09 will face certain difficulties, said DRAMeXchange.

In the contract market, 1H December contract price was still in the down trend, the drop range was about 10%. The DDR2 667 MHz 1GB average price was around 8.5 USD. The DDR2 667 MHz 2GB was only around 18 USD. The contract price has dropped 37% since the beginning of Q408 and surpassed the 34% drop range of Q308. From the demand side, since the PC OEMs have no need to pull in inventory and with the weak Christmas demand, the DRAM vendors are suffering from heavy inventory pressure. With the traditional Q1 slow season coming close, DRAMeXchange predicts that further declines may occur in 2HDec.

DDR2 667 MHz 2GB contract price dropped nearly 63% in last five months

The DDR2 667 MHz 2GB contract price dropped almost 60% since the 44 USD high in July. With the added manufacturing cost of 3 USD, the average chip cost also dropped nearly 63% in five months from 2.56 USD to 0.94 USD, which has never happened in the past. Although it's still 54% higher than the original chip price 0.61 USD, the price drop is still a heavy burden to the vendors which mainly focused on the OEM business. The main difference between contract and spot market, it's that contract market cares more about chip quality and stability of chip supply. There is no major difference of manufacturing process among vendors, and what counts is the testing time, which determined the quality. Currently the DDR2 1Gb eTT average testing time is about 150 seconds, and the original chips are about 550 seconds, which are four times difference of the time length, and the packaging and testing prices also have 30% differences. Now the DRAM vendors without output reductions mainly focused on the OEM customers, and the further chip price drop will seriously hurt these vendors. The vendors which took reduction actions earlier will hurt less but still serious. In order to bring the market back to healthy status, the industry must rapidly help itself.

NAND Flash 16Gb contract price of 1H December dropped about 10 %

NAND Flash 16Gb contract price of 1H December dropped about 10 % due to low market visibility toward 1Q traditionally low season. After restocking peak season, most downstream makers have had less motivation to increase their inventory, said analyst. Most would digest their inventory in hand around Christmas sales peak and might fill the vacancy later depending on market demand. Meanwhile, upstream suppliers have also faced pressure to lower the inventory at the end of the year. Dual effect of weak demand in low season and pressure to lower the inventory has led sharp price drop. If the sales on Christmas and Chinese New Year are better than expected, the price should stabilize. So far, outlook for NAND Flash market in 1Q09 tends to be conservative. DRAMeXchange expects weak price under low season and oversupply condition.         

Source: DRAMeXchange, Dec. 2008