DRAM production cut back

Six per cent reduction

DRAM MAKERS such as PSC, Elpida, and Hynix have announced production cutbacks and analysts expect to see a reduction in worldwide production by six percent.

According to DRAM Exchange, the move has sparked a general rise in the spot price for DRAM although this was weakened by a lack of demand for memory.

During September the contract price for DRAM fell sharply with average selling price of 1GB SO-DIMM 667MHz dropping by 15.6 percent. This is the biggest decline seen in the past six months.

As the economic recession has begun to spread from the US to Europe and emerging markets, branded PC makers with higher exposure in European markets continued to lower their shipment targets and reduced their DRAM purchases.

Previously accumulated DRAM inventory levels at these branded PC makers continued to remain relatively high, which resulted in even lower demand in the contract market.

Buyers now have stronger bargaining power and several branded PC makers have turned more conservative about the much relied-on Christmas shopping season.

Effects from the production cutbacks will not happen for another month and so short term contract and spot prices are unlikely to increase given the present weak demand.

The cash cost of a single DDR2 1Gb die is roughly 1.3 to 1.5 USD, unless other DRAM makers follow suit and cut back production, DRAM price will continue to fall with the production cost improvement or the weakening demand.