DRAM Market Rebounds

Demand boosts prices, setting pace for next year, analysts say.

Spot market prices for dynamic RAM chips have rebounded in recent days as buyers returned to scoop bargains, according to DRAMexchange Technology, which runs an online clearinghouse for the chips.

The uptrend reverses a plunge that had taken prices of the current most widely used chip, 256-megabit DDR chips that run at 400MHz, or DDR-400, to all time lows. The DDR-400 chips fell to a low of $1.99 in early December as DRAM makers and other companies in the supply chain dumped their excess chips on global markets. But DDR-400 prices have since recovered to trade at $2.09 early this week, according to DRAMexchange.

DDR-400 Draws

The most activity in the DRAM spot market has been with 512-megabit DDR-400 chips as well as with untested DDR-400 chips, according to DRAMexchange. The 512-megabit capacity hit a low of $3.82 on December 7, but has rebounded to $4.10 as of Monday, according to the DRAMexchange.

That price is even better than the same capacity in the next generation of DRAM chips, DDR2, which were last quoted at $3.72 on DRAMexchange. Market analysts reckon a shortage of chipsets needed to hook DDR2 up with the latest desktop microprocessors is to blame for its lackluster performance in the computer market.

The price of untested DDR-400 chips, used mainly in emerging markets, rose to $2.02 early Monday, from a low of $1.80 on December 9, according to DRAMexchange.

One reason for the rebound in DRAM prices was a lack of excess production in November, according to DRAMexchange. Global DRAM makers increased output of the computer memory chips by just 2.65 percent in November, compared to a 10 percent increase in October, since most new chip plants reached nearly full capacity in November.

DRAM supply growth will continue to be limited in the first half of 2006 since a number of DRAM makers have switched some production to flash memory chips, which are fetching better prices than DRAM, according to DRAMexchange. In addition, few new chip plants will ramp up production in the first half, the market research firm contends.