TrendForce: High Price Quotes from Korean Makers and Market Uncertainties Result in 6.58% Increase for Average DRAM Contract Price in 1HApr.

According to DRAMeXchange, a research division of TrendForce, as buyers and vendors have been in disagreement over price this month, 1HApr. contract price figures were not available until the third week of April. Although the industry remains in a state of oversupply, Korean manufacturers are no longer following PC DRAM price slashing strategies. Additionally, Elpida’s future is still uncertain – thus, contract price continued to increase. Average 4GB and 2GB module price was US$20.25 and US$10.5, respectively, representing increases of 6.58% and 5%.

Aside from continuing migration to the 2xnm process, leading DRAM makers plan to gradually decrease PC DRAM output ratio due to increasing demand for mobile and server DRAM. Makers are also taking a firm stance on price negotiations. TrendForce believes the DRAM industry will gradually transition from a competitive market to an oligopoly, where manufacturing and price strategies keep each other in check and there will be a return to stricter market discipline. Looking at the demand side, PC demand is showing signs of gradual recovery in 2Q. Buyers are unwilling to see DRAM makers shut down due to losses, so they will accept higher prices in the end, but negotiations will be dragged out in hopes of slowing PC DRAM price increases.

Makers Avoid Price Cuts, Contract Price Increase Likely

The DRAM industry remains in a state of oversupply (latest sufficiency ratio is 12%). As DRAM suppliers are gradually nearing fully loaded capacity, the supply and demand gap has not shrunk noticeably. From the demand perspective, although industry players generally believe PC shipments will see gradual recovery this year, PC OEMs indicate that April shipments have not met expectations. There are signs on the market that purchasing is being delayed – PC demand is not likely to pick up noticeably until Ivy Bridge is released.

TrendForce indicates, the steady climb in contract price so far this year is mainly a reflection of uncertainties on the supply side – after experiencing long-term losses, vendors are avoiding steep price cuts, and buyers are exhibiting greater tolerance for price negotiations as it is not in their interest to see suppliers fall either. However, before the supply issues are resolved, there will be inconsistencies between the increasing contract price trend and the supply and demand status.

This discrepancy is also evident on the spot market – since Elpida filed for bankruptcy with the Tokyo District Court on February 27, 2Gb chip price has yet to see a strong price trend. The fluctuation of 2Gb chip price around US$1 is indication that consumer demand is insubstantial. As a result of channel vendors’ inventory adjustment strategies, the spot market is seeing low trading volume.

TrendForce expects that as suppliers continue to avoid steep discounts, DRAM price quotes will continue on an upward trend. As DRAM suppliers’ are generally approaching fully loaded capacity and Elpida has not yet announced any capacity withdrawal, the contract price trend increase is expected to gradually slow in the future.