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Elpida sees promising 2H, halts DRAM price war

Posted: 26 Jun 2007 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM price war? Elpida memory chips? DRAM prices?

DRAM maker Elpida Memory Inc. said it has stopped an aggressive price war that hurt sales early in the year. The move comes amid signs of a second half recovery in the memory market that could help improve demand by up to 50 percent over the first half.

Suichi Otsuka, chief operating officer of the Japanese memory company, said in an interview with EE Times that Elpida stopped discounting DRAM sales in the middle of May when prices tumbled below production costs. He added that the move came when it realized PC unit shipment as well as DRAM bit per computer would surge during the second half of 2007.

Elpida is estimating DRAM demand would increase almost 50 percent during the second half of this year compared with the first half on rising unit shipments and an increase in DRAM density per computer.

Slow recovery
Although the higher demand is expected to help shore up average selling prices, a strong pricing recovery may not occur until the end of 2007 at the earliest and perhaps not until 2008, according to Elpida executives.

"Based on information from customers, we've seen that the market has hit bottom," Otsuka said. "That's why we decided not to get into a price battle anymore. We expect PC DRAM demand will grow faster than previously estimated in the second half but we don't know by how much prices will recovery."

"For the time being, we think the price recovery won't be rapid," Otsuka said, adding that the company expects some supply shortages during the fourth quarter due to surging unit shipments.

DRAM prices have tumbled sharply this yearas much as 50 percent, according to analystshurting sales at all the major manufacturers. The adoption rate for Microsoft Corp.'s new Vista OS was initially below expectations and the bounce memory suppliers were anticipating did not occur.

DRAMeXchange estimates DRAM contract prices will begin to swing slightly higher starting in July based on signs that spot prices are already showing a recovery. The market research firm said in a recent press statement that it "sees room for growth along with obvious demand pick-up."

"If the DRAM spot prices sustain its upward trend throughout June, we anticipate that DRAM contract price to see persistent upward trend in July as well," it said.

Industry sources indicated that a steady recovery is starting to show as PC motherboard manufacturers and OEMs gear up for increased production and sales during the traditionally strong second half.

Growth drivers
The first half price weakness has also encouraged PC makers to increase the amount of DRAM installed in computers, according to industry analysts. Meanwhile, rising motherboard production in Taiwan is also pointing to higher second half sales.

"Total motherboard and PC production at Taiwan manufacturers was 15.9 million in April," said Elpida's Otsuka. "Production fell to 13.9 million in May and then rose to 17.9 million in June."

Elpida's Otsuka said the chip maker estimates PC motherboard production will average 18.4 million per month in Q3, rising to 20 million per month Q4, helping to sustain higher prices.

"Compared with the first half, second half motherboard and PC production is expected to increase 18 percent," Otsuka added. "On top of that, we see huge growth in terms of [DRAM] density in PCs. Last year, density was about 800 megabytes per PC. This period it has become more than 1 gigabyte and we expect it will become 1.3 gigabytes per PC by the fourth quarter."

- Bolaji Ojo
EE Times

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