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DRAM price continues downward spiral

Posted: 15 Dec 2011 ?? ?Print Version ?Bookmark and Share

Keywords:DDR3 4GB? contract price? DRAM market?

The DRAM market remains in a slump. That couldn't have been clearer with DRAMeXchange's recent market report. According to the research unit of TrendForce Corp., the combined effects of the down season for PC shipments and the effect of the Thailand flood have further eroded the contract price for 1HDec. In fact, the average DDR3 4GB price fell to $16.5, a decrease of about six percent, while average DDR3 2GB price reached $9.25, a nearly three percent decrease.

From the market perspective, with the holidays around the corner, European and American clients are returning home mid-month. As a result, contract price negotiations were concluded in 1HDec. The Asia market will continue to negotiate prices twice a month, but with significantly fewer concluded transactions compared to November, contract price is still falling. However, as many DRAM makers have announced production cuts, the price decreases have shrunk slightly. The results of the capacity cuts should be seen in 1H12. Although the DRAM market will remain in a state of oversupply for the rest of the year, the outlook is optimistic for next year.

DRAM market

Average DDR3 4GB price fell to $16.5, a decrease of about six percent, while average DDR3 2GB price reached $9.25, a nearly three percent decrease.

The global DRAM industry was affected by the March 11 earthquake in Japan, but DDR3 4GB price recovered to $36.5 in May. However, DDR3 4GB contract price has been on a downtrend since then, arriving at $16.5 in December, a 55 percent decrease. As a result, many DRAM makers are cutting capacity or transitioning to foundry business. According to TrendForce statistics, global DRAM wafer start volume has fallen from the high of 1500K starts per month in 2008 to a forecasted low of 1000K starts per month next year, representing a decrease of 33 percent. Furthermore, December wafer start volume is approaching the lowest volume reached during the financial crisis in 2009, 986K starts per month. Taiwanese DRAM makers have made the largest capacity cuts, from a high of 450K starts per month this year to December's 250K starts per month, a 44 percent decrease.

From the supply and demand perspective, after the second round of production cuts in 2H11, the forecasted sufficiency ratio for the global DRAM industry in 1H12 has been adjusted downward, from 17 percent to 13 percent. Additionally, capacity cuts were all on commodity DRAM products. Thus, the severe oversupply situation is quickly improving, and the industry is headed toward balanced supply and demand. As for price, DDR3 2Gb spot price is also nearing the financial crisis period low of $0.6. Although shipments are affected by the down season and the flood disaster in Thailand, as the contract price downtrend has eased slightly in December, next year DRAM price may have an opportunity to recover, allowing the DRAM industry to gradually emerge from its currently gloomy situation.

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