03.27.2001
Local DRAM spot prices on an apparent rally

• The local DRAM spot market saw 2-3% price surge on SDRAM. Asian IC Exchange reported daily highs on 64Mb of US$2.4 and on 128Mb of US$4.6 yesterday.

• The supply-demand balance situation seems to have improved temporarily, due mainly to the industry's capacity conversion to other memory products, NEC's recent earthquake-induced production halt, and local DRAM makers' delay on technology migration. Our local channel distribution house sources indicate that local distributors are looking forward to stocking up DRAM inventory for the next 3 weeks.

• As the DRAM industry has experienced sharp price declines since 4Q00, the psychological impact of events that change the supply-demand balance tend to get magnified. This led to the kind of dynamics we saw in the last short-lived DRAM rally in November 2000.

• The current rally resembles the last one in that it is more psychologically driven and there is no improvement in end demand. However, the current rally is also supported by short-term supply problems. In addition, by now most makers are producing under loss and the industry sees a reduced inventory level, thus the industry is under less severe dumping pressure.

• We are consequently led to believe DRAM is well into rebound and that the current rally could sustain beyond 2-3 weeks. Nevertheless, we remain cautious on the DRAM spot price in the longer run as we do not see the end-market demand for applications picking up.

LindaLiu@Primasia.com +886-[0]2-2547-8867