Mon, Dec 26, 2005 page10

• Chip prices to rebound: report

  BOUNCE BACK DRAM memory chip prices are predicted to rise again early next year on the back of production cuts, industry analysts said in a report last week

  • By Lisa Wang / STAFF REPORTER
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  Prices of computer memory chips may rebound during the first quarter of next year as chipmakers cut production to cope with the drastic price corrections of the past few months, Taipei-based market researcher DRAMeXchange said last week.

  Taiwanese chipmakers, well-known for their strong cost-saving ability, are now under pressure from price erosion after a 50-percent decline in prices pushed them into the red, or to the brink of losses during the second quarter of this year.

  Following the third quarter recovery, prices for dynamic random access memory (DRAM) chips started on a downward trend again, according to DRAMeXchange.

  Contract prices for banker double-data-rate (DDR) DRAM modules have fallen 22 percent since September when compared to the previous three months, the researcher said in a statement.

  The price for DDR2, which processes data faster dipped by about 32 percent, it said.

  "Faced with the prospect of further price drops, DRAM chipmakers started cutting back production," DRAMeXchange said.

  Last month, the annual growth for total DRAM output slowed to around 2.65 percent, compared with around a 10-percent increase for September and October, respectively, the research house said.

  Combined with a lack of supplies, lower chip prices have stimulated unusually strong demand this month, which used to be a slow month as computer vendors traditionally reduce their inventory dramatically after the annual Christmas shopping spree ends, the report noted.

  "That indicates that contract prices are hitting the bottom and there is a chance they may rebound," the research house said.

  DRAM chipmakers attempted to inflate the contract price slightly for the second half of this month in light of improved spot prices, but most of them got flat deals, researcher said.

  Some still managed to raise prices and extended the price negotiations with their US customers ahead of the Christmas holidays, the researcher added.

  Despite the bumpy road toward price hikes, most DRAM makers held an optimistic attitude about the market, according to DRAMeXchange's survey.

  They planned to raise prices for the first half of next month and prices would be sustainable during the first half of the first quarter of next year, the researcher said.

  The contract price for the benchmark 256-megabit, 400-megahertz DDR DRAM chip was unchanged at US$1.98 from last month, according to the report.

  The spot price for the benchmark DRAM chip fell nearly 20 percent to US$2.1 on Friday from an average of US$2.6 in the third quarter.

  DRAM makers such as Taiwan's second-largest memory chipmaker Nanya Technology Corp (南亞科技) negotiate with customers such as computer giant Dell Inc for prices twice each month, while Taiwan's top DRAM maker Powerchip Semiconductor Corp (力晶半導體) sells over 70-percent of its chips to the spot market.
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