Many analysts say spot prices of the most widely used 256-megabit DRAM chips could test the US$3.00 level in the near term as the seasonally stronger PC selling season nears. For the PC and DRAM industries, sales are typically stronger in the second half as companies benefit from the back-to-school and year-end holiday shopping periods, while the first six months are sluggish.

J.J. Park, an analyst at JPMorgan in Seoul said spot prices are rising because supply is easing from capacity conversion to NAND from DRAM, and on "speculation that there could be a potential (DRAM) shortage in August." Park said this has led some spot dealers and module makers to restock on DRAM inventory.

"We continue to believe that DRAM prices will show an upward movement for a while," he said.

The spot price of the most widely used DRAM chip - 256-megabit double data rate that runs at 400 megahertz, or DDR-400 - fetched an average of $2.72 each early Tuesday, up from $2.62 last week, according to DRAMeXchange. Prices of the next-generation chip expected to become the mainstream - 512-megabit DDR2 chips that run at 533 megahertz - traded at an average of $5.14 apiece.

Contract prices of DDR-400 chips for makers that sell their chips on a contract basis to PC original equipment manufacturers rose to an average of $2.50 for the first half of July, up from $2.44 each for the second half of June.. Many analysts said they expect contract prices to also edge higher for the second half of this month.

"We expect second-half July DRAM contract prices to increase 3% to 5% and that trend to continue in August and September," Morgan Stanley analyst Frank Wang wrote in a recent research report.

Merrill Lynch analysts said in a report issued earlier this month they expect 256-megabit DDR1 prices to remain stable in the US$2.00-US$2.50 range during the second half.

"The DDR1 price could rebound as chipmakers cut back their DDR1 capacity to increase their DDR2 production," Merrill said in its report.

In a sign that the DRAM industry is headed for better times after suffering from steep price declines in the first and second quarters of this year, Samsung executives said on Friday that they expect DRAM prices to rise in the third quarter.

Woosik Chu, senior vice president of investor relations at the world's largest DRAM producer, said seasonal strength in PC shipments is expected to lead to a "sharp recovery" in the DRAM market resulting in price increases. For Samsung, average selling prices for DRAM chips fell to the high $3-range in the second quarter from the high $6-range a year earlier.

Il Ung Kim, vice president of the semiconductor business said PC shipments globally are expected to rise 10% in the third quarter, leading to better demand for DRAM chips. Kim said the DRAM market should see supply and demand balance in the third quarter and experience a "slight" supply shortage in the fourth quarter.

Despite Samsung's optimism for price increases, Huang of Goldman Sachs said she sees stable prices at best, forecasting DDR-400 chips to fetch around $2.70 for the third quarter.

"For prices to be sustainable at $3.00, it will be too big a burden on system makers," she said.

But even stable prices will be a sign of good news for DRAM manufacturers after they recorded sharply lower results for the just-ended second quarter.

By: DocMemory
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