Sluggish Demands after Lunar New Year Drag eTT Spot Prices Down 13%, Analyzes TrendForce

Given the sliding shipments of white-box tablets in the traditional off-peak quarter and the manufacturers’ already replenished supply, the demand for memory modules and chips became sluggish in the spot market. As a result, DDR3 4Gb 512Mx8 eTT prices slid by 13% following the Chinese Lunar New Year period.

"With PC shipments remaining weak during the traditional off-peak quarter, Intel delayed its new Broadwell chip announcement to Q4, and Microsoft 8.1 unable to properly stimulate PC demand, the PC OEMs’ attitude towards the second half of the year has become relatively conservative,” said Avril Wu, Assistant Vice President and Analyst at TrendForce’s research division, DRAMeXchange. “An increasing number of Chinese white box brands are starting to experience a noticeable slowdown in their tablet and smartphone shipments following the economic downturn, and are accumulating more inventory. The impact of their lowered shipments on the spot prices is already visible, and can be expected to continue into the second quarter.” 

Looking at the upcoming periods, the quarterly bit output growth for major DRAM companies such as Samsung, SK Hynix, and Micron are all expected to be positive. The existing gap between the market’s supply and demand, meanwhile, is likely to grow further as SK Hynix’s Wuxi plant recovers its full production capacity, and as Micron actively migrates towards 25nm technology. 

In 2Q, the industry’s three biggest DRAM manufacturers are likely to continue pursuing quarter based “lock-in” deals with their clients as the PC shipments continue to remain weak. Fortunately, as the peak quarters for smartphones arrive, the two major DRAM makers from Korea are already taking steps to shift their production towards Mobile DRAM. With PC DRAM not expected to show any significant bit output growth for the second quarter, TrendForce believes the oversupply situation in the market will eventually ease.

DRAM Market Price Movements

Following the Chinese Lunar New Year period, the spot price for mainstream DDR3 512Mx8 eTT slid from US$4.05 to US$3.52, showing a decline of 13%. The price for other mainstream chip, DDR 4Gb 256Mx16 1333/1600MHz, fell from US$4.1 to US$3.72, a 9% drop. Regarding the contract prices, given that the PC shipments in the industry have long remained suppressed, an increasing number of DRAM manufacturers have sought to negotiate “lock-in” contracts with their clients that are based on the entire quarter; other than to allow for stable shipments, such a deal prevents the industry’s price drops from being too severe, as can be seen in the average contract prices for the mainstream 4GB chip, which fell by only 5.9% (US$34 to US$32). As much as the DRAM industry’s oligopoly structure ensures profitability for companies, the industry’s gradual price decline is still an undeniable trend.