DRAM pricing suffers significant declines, Converge reports
Converge believes that the DRAM market has bottomed out.
Staff -- EDN, September 22, 2008
Memory update
The past four weeks have not been sympathetic to the DRAM market, with both contract and spot market pricing suffering significant declines. During this time span, prices for 1 GB and 2 GB PC800 modules dropped roughly 20% in the spot market. Modules with 1 GB declined from $16.50 to as low as $13.20 at one point, and 2 GB modules declined from $37 to $30. The majority of the product available in the spot market has been from Samsung. Meanwhile, domestic memory vendors have refrained from taking on additional inventory due to the price volatility and supply saturation in the Asian market. As of the second week in September, the spot market is still approximately 10% below direct pricing, even after the latest round of contract negotiations.
Converge believes that the market has bottomed out. Due to rapid price declines, the market has not had time to settle. We believe that pricing should stabilize for 1 GB and 2 GB PC800 modules in the $14 to $15 and $31 to $32 ranges, respectively. As October draws closer, there should be a slight rebound in pricing. With the severity of price declines since July, we anticipate that DRAM manufacturers will try to counter these record-low prices by slowing down production and reducing supply. Additionally, October and November are generally busy production months, so they should help further stabilize the DRAM price freefall.
CPU update
In this edition of Market Insights, we look at the complexities of predicting CPU demand shortages, as well as the patterns of supply that tend to repeat themselves with each product launch.
In our June and August updates, we discussed rumors of shortages due on the new mobile Montevina platform. These reports persisted throughout the summer, but as the product began to ship in August, we saw the market begin to heat up.
Celeron Mobile 575, T3200, T3400, T5800, T5900, P7250, and T9400 have been in demand across all regions for the past six weeks, and we expect this situation to continue well into October.
At the time of writing this update, the soon-to-be launched T3400 and T5900 seem to be safe investment choices for an early stock buy as soon as they become available. Additionally, there is enough dialogue across the regions to suggest that the T3400 and T5900 have the potential to be the next hot mobile parts in demand. It will be interesting to track how the supply situation with the Montevinas develops during the run-up to the holiday season.
However, as any production planner can attest, the life cycle of supply and demand for a CPU can still be difficult to predict.
For example, during the last holiday season, the Intel product road map prescribed that the E8400 would replace the E6550. Previously, the P4 630 SL7Z9 and the PD 925 CPUs were the bestsellers, as they occupied the traditionally hallowed space of the 3GHz desktop processor.
Knowing that the E6550 would be eventually phased out meant that there would likely be some last time buy supply issues. In midsummer 2008, the E6550 led the demand for end-of-life Conroe shortages.
When the replacement E8400 hit the market, it quickly launched as a cost-saver and a brief shortage part instead of simply a shortage part. Initially launched at a direct price of $179, the part quickly dropped to $154. A speculative stock buy that may have looked like a smart move at the start of the year would have turned into a potentially costly mistake as the unpredictable life cycle of the CPU unfolded.
General IC update
We are currently tracking parts that might experience shortages and delays in the following areas:
The anticipated uptick in demand for tantalum capacitors due to the expected increases in raw tantalum pricing has been slow to materialize, primarily as a result of general market sluggishness.
Spot shortages continue on some Pulse Engineering transformer modules, with the heaviest activity occurring in early September.
Shortage activity has increased on Freescale network processors, as well as some Vitesse transceivers.
Converge has learned that Altera has increased prices 20% across the board. Altera PLDs are currently showing some pockets of shortage activity.
Storage update
3.5-inch drives
We have been tracking an increase in demand and volume sales on IDE HDDs in the 3.5-inch market segment. This represents a sharp reversal of a downward trend experienced during the past three months. Most of the activity is in the 80 GB to 160 GB range. However, the 250 GB and higher capacities are experiencing an increase, as well, although not to the extent of the lower capacities. While demand and sales are on the rise, pricing has remained low, with no significant change month over month, with the exception of 1 TB devices. This capacity has dropped to the $115 to $125 range in the open market.
2.5-inch drives
Pricing for 2.5-inch SATA HDDs continues to decline in the open market. The 40 GB and 60 GB capacities are priced in the low- to mid-$20 range, while the 80 GB and 120 GB are selling in the mid-$30s. Meanwhile, 160 GB and 250 GB HDDs can be found in the mid-$40 and mid-$50 ranges, respectively. Overall, sales volumes remain low. However, we are seeing an increased amount of part number–specific demand at the CEM/OEM level.
Click here for the
August Market Insights report
.
Converge note: Prices listed for products in Converge's Market Insights report are based upon market conditions at the time the articles are written (September 17). Prices quoted in these articles should be used only as a guide, as market conditions vary daily and can affect overall spot market pricing.
