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Components | May 13, 2011

1HMay DDR3 2GB session high contract rose 2.7%

According to DRAMeXchange, 1H’May contract price continued to rise and the average DDR3 2GB contract price increased by 2.74% to USD 18.75 (USD 1.02/1Gb) from USD 18.25.
The average DDR3 4GB contract price was also increased by 2.82% to USD 35.5 (USD 2.13/2Gb). Some DRAM makers have been having yield issues with their 40nm technology nodes. As a result, first-tier PC OEMs turned to other DRAM vendors to avoid potential disruptions in their own production plans. The customers consented to prices at the higher, versus the usual lower, end of the price range as they rushed to fill their demand requirements.

DRAMeXchange predicts that the 2GB contract price of USD 20 is attainable in the short term as the aggressiveness persists.

Four Reasons for the Positive Outlook of Contract Prices in 2H’11

What worth noting was the fact that transactions were done near the upper end of the contract price range even though the increase was mild in the observed time period. Most PC-OEMs have been conservatively optimistic on the sales in 2H11 and raised their inventory levels even though their shipments in 1H11 have been below expectations. The upward momentum is obvious. DRAMeXchange shares its observation on this positive trend:

1. Vendors are increasing their allocations to products other than commodity DRAM. DRAM makers have shifted their capacities for mobile and server DRAMs to address the rising demands from the growing smartphone, tablet PC and cloud computing applications. The shift will work to ease the oversupply concerns of commodity DRAM products.

2. Two DRAM vendors suffered poor yields in their 40nm production. RMAs have been issued and both quality and design flaws were being questioned and examined. The shortened supplies of DRAM will lead prices to go up.

3. Acer admitted to its strategic mishaps and poor performance. Certain first- tier PC-OEMs attempt to take advantage of situation and grasp additional market shares. The aggressive procurements of DRAM products made the higher prices more agreeable.

4. Inventory replenishments were initiated in April and will continue. With softened PC sales in 1H11, PC-OEMs kept their inventories at unusual low levels. Some even went down to less than one month of DRAM supply. The continuing re-stocking will help to the price to go up.

Both Samsung and Hynix predicted that DRAM prices will likely to increase in 2Q'11 from their recent 1Q11 earning releases. The price increase we have seen in the 1st half of May is the beginning of the upward trend. The upward momentum will continue and become more apparent in the remainder of the 2nd quarter of 2011.

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