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DRAM price stays flat in October

Posted: 01 Nov 2011 ?? ?Print Version ?Bookmark and Share

Keywords:PC industry? DRAM? contract price? HDD?

DRAM contract price has decreased by 47 percent since May, but has evened out in 2HOct. due to the combination of traditional peak season demand and less shipment pressure on makers with the start of Q4, according to DRAMeXchange. Average contract price for DDR3 2GB and 4GB remained at $10.5 and $19.5, respectively. Chip price was about $1.06 for DDR3 2Gb.

As for the spot market, DDR3 2Gb chip price is still creeping downward with average price at $0.92. However, as there have been few concluded deals on the spot market, there is little sign of price recovery in the near future.�From the market perspective, September notebook shipments were strong. PC ODM shipment volume reached 42 million, an 11.2 percent increase MoM. Shipment volume will remain high in October, which is certain to help reduce DRAM inventory levels. As first-tier DRAM manufacturers are under little pressure to ship, it is unlikely that price will decrease in the short term.

Although the market remains in a state of oversupply, benefiting from capacity cuts in Q3, TrendForce Corp. expects a relatively stable situation in Q4, with bit output increasing by five percent QoQ. As for demand, the 1HOct., flooding in Thailand has negatively affected the HDD industry, increasing the likelihood of unstable PC shipments. This in turn means that it will be more difficult to forecast November DRAM contract price, which will result in more conservative attitudes overall.

As the DRAM industry saw inventory adjustments and production cuts in Q3, first-tier manufacturers' stock levels have decreased. In addition to demand from the traditional peak season, the contract price decline slowed in September and stayed flat in October. However, there are still many uncertainties in terms of demand. This include PC sales during China's National Holiday weekend not exceeding expectations, low Q4 retail sales visibility and the extent of the Thailand flood disaster's impact on the PC supply chain. As Thailand is a strategic location for the HDD industry, accounting for about 30 percent of global capacity, the flooding has hit HDD makers hard. Western Digital, for example, has closed two local plants that will result in a 60 percent capacity decrease. Nidec, with nearly 80 percent of the global HDD market, has temporarily shut down seven factories. It is not yet known when operations will resume. While the flooding has not had as direct an impact on the DRAM industry as Japan's March earthquake, the current HDD shortage may prove to be detrimental to overall PC shipments.

According to TrendForce, PC OEMs have an average of about two to four weeks of HDD inventory remaining. Along with HDD suppliers' key component inventory, the industry supply chain has about two months of stock left. At the end of this period, the PC industry will enter its down season beginning December, and the decreased demand will counteract any risk of material shortages. If key component makers manage to resume operations in Thailand, PC OEMs should be able to avoid a shipment crisis. Meanwhile, some PC OEMs are seriously considering the adoption of SSD as a temporary replacement for HDD. However, as the price gap between SSD and HDD is still fairly wide, SSD adoption will likely only increase in premium PC lineups. The short-term future of DRAM contract price will depend on the recovery of makers affected by the Thailand floods, but based on the current situation, there should be limited impact on both PC shipment volume and DRAM contract price.

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