Components | October 26, 2011
October DRAM quotes stable
DRAM contract price has decreased by 47% since May, but ceased falling in October mainly due to the combination of traditional peak season demand and less shipment pressure on makers with the start of Q4.
Contract price stayed flat for 2HOct., with DDR3 2GB and 4GB average contract price at US$10.5 and US$19.5, respectively. Chip price remained at approximately US$1.06 for DDR3 2Gb. As for the spot market, DDR3 2Gb chip price is still on a slight downtrend; today’s (26 Oct.) average chip price was US$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 42M, an 11.2% 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 currently remains in a state of oversupply, benefitting from capacity cuts in Q3, TrendForce expects a relatively stable situation in Q4, with bit output increasing by a mere 5% QoQ. As for demand, the 1HOct. flooding in Thailand has negatively impacted 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. Thailand Floods Hit HDD Supply Chain, PC OEMs to Monitor Impact on Shipments As the DRAM industry saw inventory adjustments and production cuts in Q3, first-tier manufacturers’ stock levels have already decreased significantly. 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: PC sales over China’s National Holiday weekend did not exceed expectations, Q4 retail sales visibility is low, 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 over 30% of global capacity, the flooding has hit HDD makers hard. Western Digital, for example, has closed two local plants, which will result in a 60% capacity decrease. Nidec, with nearly 80% 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, currently PC OEMs have an average of approximately two to four weeks of HDD inventory remaining. Along with HDD suppliers’ key component inventory, the industry supply chain has over two months of stock left. At the end of this period, the PC industry will enter its down season in the beginning of 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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