by Anton Shilov
02/15/2012 | 03:05 PM
Minimal price as well as average selling price (ASP) of dynamic random access memory (DRAM) started to increase in the first half of February, according to DRAMeXchange, a research division of TrendForce. Nonetheless, analysts claim that purchasing desire is somewhat weak and therefore contract and spot prices are unlikely to increase considerably, but may possibly get higher shortly.
The contract price of 2GB DDR3 module stayed flat in the first half of February, but the highest price did not exceed $9.5. The highest 4GB DDR3 module price jumped from $17.25 in the second half of January to $18 in early February. ASP and lowest price also increased, from $16.5 and $16 to $17.5 and $17, respectively. The majority of deals fell between ASP and highest price, indicating the likelihood of further increases in the short term.
DRAMeXchange claims that the spot and contract price trends are not showing similar developments and purchasing desire is somewhat weak, and PC OEMs are mostly turning to the contract market for inventory at the moment, in hopes of securing large-volume deals. Therefore, falling by 5.32% since Chinese New Year, DDR3 2Gb chip ASP arrived at $0.89 today, gradually closing the gap on contract chip ASP of $0.94. This is enough to indicate that the current DRAM market is not reliant on demand – supply-end capacity adjustments are the key to maintaining supply and demand balance.
PC DRAM ASP has been atypically strong in the first quarter of the year, mainly due to the effects of capacity cuts made in Q4 2011. Although demand has remained weak in Q1 2012, disciplined limitation of production on the supply end has had a positive impact on the contract price trend. Price stabilized in January, and has begun to increase notably in February. This development has undoubtedly taken DRAM manufacturers, most of whom are deep in the red, by surprise. The contract price trend will continue to see strong momentum in the short term, but Q2 price will depend on suppliers’ self-restraint when it comes to production levels.
Looking farther ahead, after the upcoming short-term fluctuations, due to the traditional strong PC sales season and commercial upgrades that have not occurred in a while, second half of the year will see increased demand that will benefit the stabilization of the PC DRAM price trend.
After contract price stabilized and bottomed out last December, market sentiment turned optimistic, especially as prior capacity cuts began to take effect. Contract price began to rise gradually in January and increased significantly in February. Due to the price stabilization and the fact that in the second half of the year PC market demand is forecasted to be stronger than last year, global DRAM makers will increase capacity slightly, by 20K starts per month, while Taiwanese manufacturers will add nearly 80K starts per month, for a total increase of 100K starts per month. According to TrendForce statistics, as capacity is readjusted, forecasted DRAM industry growth for 2012 is also adjusted, from 21% year-over-year to 30% year-over-year.
Nonetheless, product mixes will change: DRAM makers are all aggressively transitioning from commodity DRAM to mobile and server DRAM production. Commodity DRAM accounts for 49% of total DRAM output, down from 53% in 2011, marking the first time the commodity DRAM ratio has fallen below the 50% mark. As commodity DRAM is unprofitable, reducing output will undoubtedly benefit price recovery.