Average Contract Price for 2GB memory modules falls in 2HJuly

DDR3 2GB and 4GB contract price is USD 14.5 (1Gb USD 0.75) and USD 28, representing a decline of 9.38% and 9.68%, respectively. Overall price has decreased 15.94% in the month of July. As spot market price has also fallen, module houses are in a near panic, underselling to reduce their inventory levels and prevent losses. DDR3 2Gb average spot price was USD 1.62 in June, with the current price representing a 16% decrease. With such price quotes, the spot market is crowding out contract transactions. Thus, contract price negotiation is becoming increasingly difficult, and it is clear that the downward trend of DRAM price has been firmly established. 2HJuly contract price suffers 15.94% Decrease, DRAM manufacturers utilize special deals to retain market share For DRAM manufacturers, although the Q3 peak season has already begun, July’s DRAM price has not seen the gradual increase of past years. July’s 2GB module contract price has decreased 15.94% from last month, an indication that the market outlook for 2H11 is not optimistic. Concluded transaction volume has shrunk rapidly since June. In addition, PC shipments have been adjusted downwards, content per box growth has slowed, and economies are sluggish worldwide. With no sign of improvement, these factors have caused DRAM prices to decrease far more quickly than expected. Since this wave of falling DRAM prices comes only two years after the lowest point of the previous global financial crisis, DRAM manufacturers were truly caught off guard by the rate of drop. Cost-wise, even the most advanced 30nm manufacturing processes are on the verge of breaking even, let alone the mainstream 40nm processes. On the supply side, the total number of wafer starts has decreased 2% compared to last year. While manufacturers have been conservative in terms of wafer starts, the marked increase in production volume brought about by process migration has caused this year’s DRAM prices to frequently hit rock-bottom. As was the case in the previous financial tsunami, the current DRAM market has been negatively affected by overall weak economies. However, an even more debilitating factor is that regardless of how low DRAM prices have dropped, there has been limited stimulation to content per box. In terms of PC production cost, 2GB memory module price for July only represents about 5% of total cost, which should have spurred PC-OEMs to increase content per box. However, as the Windows 7 operating system does not require much of a hardware increase, consumer acceptance of 4GB and larger memory modules has been mediocre overall. Without question, this just adds fuel to the fire, as the DRAM market is already in a state of oversupply. As for the recent contract price trend, in order to increase market share when there have been limited transactions on the client end, DRAM manufacturers are engaging in special deals. Thus, the proportion of total transaction volume represented by special deals has shown signs of an increasing trend. Aside from concluded transaction prices approaching the published low price, a considerable proportion of transactions have been conducted at new under-the-table lows. As DRAM manufacturers are eager to clean out their current stock, special deal stipulations often include requirements for PC-OEMs to purchase inventory within a certain amount of time or bundle chip purchase with a certain proportion of 2GB or 4GB modules. As DRAM manufacturers continue to hang by a thread, they can only hope that PC-OEMs will begin inventory restocking soon and let DRAM prices return to a reasonable benchmark.