The following column was provided by Nam Hyung Kim, a principal analyst with iSuppli Corp., an El Segundo, California-based market research firm.
Slow demand is continuing to take its toll of the DRAM market, with prices declining for the seventh consecutive week on U.S. and Asian spot memory markets.
The U.S. spot market price for 256-Mbit Double Data Rate (DDR) 333 declined by another 5 percent this week, following a more than 20 percent decrease over the previous six weeks.
Conditions are down even more strongly in the Asian spot memory market, where traders are anticipating pricing for DDR 333 will fall to the $4.50 level soon, in line with iSuppli Corp.'s forecast.
There presently is virtually no demand in the spot market. Dealers have gone into a wait-and-see mode.
Beyond the DDR format, SDRAM prices also are under pressure, especially for 64-Mbit parts configured as 4Mbit-by-16. This is due to slow demand and increased output from tier-one DRAM suppliers.
Some traders believe the spot market price declines are due to weak demand from China. The Chinese government's moves to cool the nation's red-hot economic growth may be responsible for the decline in demand, the traders said.
Amid all the negative developments in spot-market pricing, one major question is: how will OEM pricing shape up in the second half of June?
OEM prices are higher than spot prices now. Thus, iSuppli expects OEM prices to decline for the first half of June, reflecting recent spot-market price decreases.
The next question is, when will spot market prices hit bottom?
ISuppli expects that certain DRAM suppliers soon will begin to resist further declines as spot market prices approach their manufacturing costs. Suppliers whose costs are higher will lead the charge against further declines.
However, most Asian suppliers' manufacturing cost per DRAM is less than $4.00. Therefore, spot prices are expected to decrease to the $4.00 to $4.50 level without spurring strong resistance from the Asian suppliers.
Nam Hyung Kim can be contacted at the following email address: email@example.com