DRAM Prices Start to Soar in June

With prices already below the manufacturing costs, major DRAM makers have expressed an unwillingness to cut their prices further in clearing out their excess inventory. Current market observations show the DDR2 chip price possibly bottoming out. If this occurs, it should drive up the chip demand, and spur a rebound in the spot price, says DRAMeXchange.

Last week, DDR2 eTT chips leapt 12.5%, hitting a weekly high of USD 1.65. On May 23rd, it experienced a daily price jump reaching 10%. This helped increase the branded chip price 2.3% to USD 1.75, resulting in much stronger market transactions in the DRAM spot market. Despite the fact that Taiwan DRAM makers posted a gross profit of nearly 50% in 4Q06, and 30% in 1Q07, DRAMeXchange believes the persisting DRAM price declines in May will cause them to post a loss in 2Q07.

Although DRAM makers must still ship their chips in May, they indicated no additional price cuts would be made, due to the continuing losses. Prices have thus started to increase for last week. Yet, the end market demand is not expected to pick up in May and June, and PC shipments have been performing worse than expected in May, in the wake of a weak seasonality. Furthermore, PC OEMs, major spot market buyers, and module houses still have inventory levels lasting for more than a month. DRAMeXchange believes that by only relying on buyers in purchasing cheaper chips, the DRAM price increase will be limited at least before June.

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