Memory Pricing to Plunge in Q3 and Rest of Second Half – Analysts

From X-bit Labs: A dramatic oversupply and freefalling prices are in store during the third quarter for the dynamic random access memory (DRAM) space, resulting in a turbulent second half for besieged DRAM suppliers, according to analysts with IHS iSuppli.

The average selling price for Double Data Rate 3 (DDR) in the 2Gb density – the bellwether DRAM product – is projected to drop to $1.60 in the third quarter, down 24% from $2.10 in the second quarter. The dive would be the biggest decline for the year, following a surprisingly solid second quarter during which pricing fell only 5% from the first quarter. Moving into the fourth quarter, the price could plummet another 22% to $1.25 – dangerously close to cash costs for many manufacturers. Only a year ago in the third quarter, pricing stood at $4.70.

“Contrary to typical seasonal patterns in which prices are very soft during the second quarter, that period this year saw relatively flat, unchanged DRAM pricing compared to the first quarter. However, companies did not capitalize on the healthy pricing levels to increase shipments in the second quarter—which, in retrospect, may have been the best time to do so,” said Mike Howard, principal analyst of DRAM and memory at IHS.

DRAM manufacturers attribute the low growth in shipments in the second quarter to two primary reasons: bloated inventory and challenges in transitioning to new process technologies.

Taiwanese-based Nanya Technology Corp., for instance, had as much as 30 days of inventory when it started to throttle shipments, reflecting its challenges in getting material from factories into the hands of customers. For its part, South Korean Hynix Semiconductor Inc. indicated it suffered poor yields at the 38nm process node, the result of ramping up to a new process. And in the case of Idaho-based Micron Technology, a large disparity between spot and contract prices in May – the company’s final fiscal month for the third quarter – prompted the firm to build inventory instead of selling into the spot market.

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