Don't be fooled by the sudden rise in spot market pricing for DRAM

Don’t be fooled by the sudden rise in spot market pricing for DRAM memory over the last four weeks. Although the market has spiked roughly 20%–25% on the staple 64x8 PC667 chips, there have been no signs of any module activity in the spot market. The 64x8 PC667 chips rose from $0.85 to $1.10 over the past month, but they have since settled at roughly a $1.00 price point. With the rise in 64x8 PC667 pricing, module pricing also rose — not due to demand, but due to the cost of goods to assemble. In fact, there is still plenty of 1 GIG PC667 module inventory available in the channels. The 1 GIG modules rose from $17 to $20–$21 during the time span already mentioned but also retreated to an $18.50 price point. Various industry analysts believe the rise in price was due to a slight reduction in production from the DRAM manufacturers and spot market buys needed for builds before the Chinese New Year. As the holiday approached, pricing quickly dropped by about 10%.

None of this activity should be considered a rebound, as the market has not been able to sustain the increase in price. Converge still believes we are several months away from a true, sustainable rebound in the DRAM market. It is still too early to forecast an exact timetable as to when the market will gain some meaningful momentum, but we are hoping that by the end of March we will see some signs of life.

Chinese New Year quiets IC market

The anticipated slowdown leading up to Chinese New Year arrived a little sooner than expected this year. There will be little movement in the industry until Asia returns to full force by the middle of February. We are currently tracking parts that might experience shortages and delays in the following areas:

- TI op amps, Freescale processors, and Microsemi military diodes continue to experience long lead times.
- Some high-CV capacitors are still seeing spot shortages, as are some of the "run of the mill" ceramic caps.
- Lead times on Kemet tantalum capacitors are extending, and there is an increase in demand for AVX tantalum caps.
- Pressure on Cypress microcontrollers and clock drivers seems to have abated somewhat.
- We are tracking some spot shortages on Fairchild and Maxim devices.
- We see continued shortages of Broadcom parts, especially the Serverworks chips.
- There are continuing inquiries for Qualcomm mobile phone chip sets from Asian mobile phone makers, confirming a slight upturn in mobile phone demand.

Storage Update: Notebook drive market remains active

Desktop Drives
There has been little change in pricing for mainstream IDE/SATA drives since last month. The demand remains steady for SATA HDDs in the 250 GB through 400 GB capacities. Meanwhile, as manufacturers discontinue or slow production of the lower-capacity desktop IDE drives, we are seeing a spike in demand for the 40 GB through 160 GB HDDs. This is both part-number specific, as with the model WD400BBs, and capacity specific, especially in the 40 GB and 80 GB HDDs.

Notebook Drives
The notebook drive market remains active. There continues to be strong demand for 2.5” SATA HDDs in the 80 GB, 120 GB and 160 GB capacities. Open-market pricing varies by as much as $10/unit among same spec drives from different manufacturers. The 2.5” IDE market remains strong as well, specifically for the 40 GB, 60 GB and 80 GB 5400 RPM HDDs, although the lower-capacity, lower RPM HDDs volume has yet to drop off, with pricing remaining relatively stable month over month.

Server Drives
SATA drives continue to overtake SCSI in the server space. Their higher available capacities and lower cost make them attractive alternatives. The mainstream capacities range from 400 GB to 750 GB. There has been little, if any, demand for 1 TB drives as of this update. There is part-number-specific service demand for ST373207LC/LW and ST3300007LC/LW.

CPU Update: Intel introduces upgraded CPUs

In January, Intel reduced the list price on a number of its active processors and introduced upgraded CPUs into the market at pricing similar to that of its predecessors. Typically, when new product releases and price drops occur at the same time, a period of market uncertainty is created within the OEMs, creating open-market demand. Although the Intel desktop Core 2 Duo E8190, E8200, E8400 and E8500 have been released into the market, the official launch date is listed as January 20, 2008.

These new CPUs, valued from $160 to $260, replace the similarly priced 1.86 GB E6320 through 3 GB E6850 models. Converge is currently receiving a great deal of inquiries for the new E8XXX series CPUs (although current availability remains tight) as well as the E6XXX series CPUs. Demand persists for the E6300, E6400 and E6750 models, provided they are delivered at standard pricing. We anticipate strong demand for both series through February, with little cost savings on the replaced stack.

Strong open-market demand for notebook processors continues, for trailing edge technology rather than current processors. For example, there has been demand for newly released CPU models such as the T8100 through T9500; however, requests also continue for older T7XXX, T2XXX and T5XXX series CPUs, with pricing roughly at standard published pricing.

Memory Update: Surviving the DRAM market

The theme for the first half of 2008 is surviving the DRAM market. As the new year begins, look for DRAM manufacturers to strive for stability during the first quarter. The DRAM market is already at an all-time low and, generally, Q1 tends to be slow from a production standpoint. Converge believes that current spot-market pricing is where the market will remain during the next three months, plus or minus a percentage point. There is not much room for further decline, and if this occurs we can expect to lose one of the larger DRAM manufacturers to lack of funding. At today’s pricing, $8.50 for 512M DDR2 and $16 to $16.50 for 1GIG DDR2, there is no money being made.

If the contract and spot-market prices can remain stable over the next three months, the market should slowly rebound in Q2. We cautiously use the word rebound because any sustained increase in market price, even if small, would be considered a rebound. In the past, activity during the month of March has usually been a good indicator as to how Q2 will unfold from an open-market perspective. March tends to be a strong production month as forecasts for the year begin to come to fruition.