DRAM chip price still can’t fight against the weak spot market demand, although the drop range was smaller than the previous week, the price is still in the down trend. Last week (Dec 2nd to Dec 8th), the DDR2 1Gb eTT chip price dropped from US$ 0.67 to US$ 0.61, with the drop range of 9%. The DDR2 667 MHz 1Gb also dropped from US$ 0.64 to US$ 0.61, with the drop range of 5%. The DDR2 512 Mb eTT slightly dropped 3%, but the price was already closed to the packaging and testing price. There is no cash inflow for the DRAM vendors and the output reduction has been taking into consideration to decrease loss. From the spot market point of view, 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 low Christmas Holiday demand, the time period of consuming inventory will be elongated. The recovery of demand in 1H09 will face certain difficulties.

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 US$ 8.5. The DDR2 667 MHz 2GB was only around US$ 18. The contract price has dropped 37% since the beginning of 4Q08 and surpassed the 34% drop range of 3Q08. From the market side, since the PC OEMs have no need to pull in inventory and with the freezing Christmas demand, the DRAM vendors are suffering from heavy inventory pressure and have to ship products caused the contract price to drop again. With the traditional 1Q slow season coming close, the 2H December contract price is possible to go down again.

The DDR2 667 MHz 2GB contract price dropped almost 60% since the US$ 44 high in July. With the added manufacturing cost of US$ 3, the average chip cost also dropped nearly 63% in five months from US$ 2.56 to US$ 0.94, which has never happened in the past. Although it’s still 54% higher than the original chip price US$ 0.61, 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, 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.

By: DocMemory
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