Subject: DRAM Prices
Since you are a follower of DRAM pricing, I imagine you’ve noticed the following article in the WSJ.
05/13/96
DRAM Prices/Dataquest Analyst -2: Collapse Seen Unlikely
AP-Dow Jones News Service
TOKYO -- Dynamic Random Access Memory (DRAM) chip prices are expected to stabilize in 1996 after having slid sharply at the beginning of the year, a top analyst at semiconductor market research company Dataquest said Tuesday.
Speaking at a seminar, Dataquest's principal DRAM market analyst Jim Handy said continued strong growth in personal computer sales should support DRAM prices throughout the year and lead to a 'normal DRAM market by 1997.'
'We think it's very unlikely that DRAM prices will collapse,' he said.
DRAMS are used as cheap, bulk memories in computer, telecommunications and multimedia applications. NEC Corp., Toshiba Corp., Mitsubishi Electric Corp. and Hitachi Ltd. are among major Japanese DRAM manufacturers.
Handy estimates that in 1995, Japanese DRAM makers supplied 47% of the world DRAM output.
He said that DRAM makers' profitability should remain strong despite lower prices after the 'golden years of 1994 and 1995.' He said he sees 1996 profit margins for DRAM makers at about 50% and 'only 1994 and 1995 were better.'
However, Handy cautioned that under some circumstances DRAM prices could fall further. Prices likely would fall, for example, if the personal computer (PC) market slid to 45 million units worldwide in 1996 from Dataquest's 1996 forecast of 70 million units or if DRAM makers were to vastly exceed their 1996 production goals, Handy said, adding that 'neither of which is likely.'
In 1995, worldwide PC shipments totaled about 61 million units.
Handy said that if PC shipments are 'anywhere near' 70 million units, DRAM makers should be very profitable.
Currently, 4-megabit DRAMS cost from $3 to $4 each to manufacturer, Handy said. Based on a 'foreign market value or fair market value calculation, prices could have gone as low as $3.25 to $4.25 apiece, however, current contract prices for 4-megabit DRAMS are around $7 each in the U.S., Handy said. Dataquest sees the price of 4-megabit DRAS falling to around $6.30 apiece by
the end of the year.
For a 16-megabit DRAM, the contract price currently is around $28, he said.
As for static random access memory (SRAM) chips, Handy said there is a serious production overcapacity problem. He said SRAMs used to support Intel Corp.'s Pentium chips will particularly remain under pressure this year.
Handy noted that the spot market, where DRAM users have been selling excess inventory, tends to overreact to changes in contract volume.
'But we expect contract volume prices to level off and spot market prices to come back up,' Handy said.
'We may see extremely low spot market prices now, but they are unlikely to bring contract prices down,' he said.
The first quarter of 1996 saw a sharp decline in DRAM prices because PC makers overestimated demand for PCs and took on excess DRAM inventories, which they then unloaded at increasingly lower prices.
Copyright © 1996 Dow Jones & Company, Inc. All Rights Reserved.
I’m wondering if you share this opinion for DRAM prices and if not what is your outlook?
Thanks
Chi |
