William,
This may have been some of the reason for AMAT's weakness since DRAM prices are a large part of the equation for what the upturn will look like:
204.247.196.14
DRAM glut keeps driving down 64-Mbit prices
A service of Semiconductor Business News, CMP Media Inc.
Story posted 4:15 p.m. EST/1:15 p.m., PST, 4/23/99
By Jack Robertson
NEW YORK -- OEMs can relax for the time being and memory makers can worry a little bit: spot-market prices for 64-Mbit PC100 SDRAMs plunged this past week to reach a new record low of $7.50.
Independent distributors NECX Private Exchange and American IC Exchange (AICE) said they expect prices to continue falling for another month or more. "There's just too much supply coming into the market -- far more than we had expected," said Frank Cavallaro, director of worldwide sales for NECX in Peabody, Mass. "I don't see PC100 prices bottoming out for the rest of the [second] quarter."
DRAM prices are down 25% so far in 1999, and the continuing decline is fast washing out suppliers' hope that the market stabilization witnessed earlier in the year will last. Instead, an avalanche of PC100 chips hit the market in late January and shows no signs of letting up, according to Paul Myers, DRAM commodity specialist for AICE in Aliso Viejo, Calif.
OEM contract prices for 64-Mbit parts are on average about 50 cents higher than the spot price, but in some cases they approach parity, said Sherry Garber, analyst with Semico Research Corp. in Phoenix. OEM buyers, who had been trying to extend contract terms over several months when DRAM prices were inching up, are now reportedly seeking weekly contracts to take advantage of falling rates.
Don Baldwin, vice president of sales for Micron Technology Inc. in Boise, Idaho, recently told analysts that PC100 DRAM prices "have been on a linear downward slope since January." He saw no letup on the horizon.
A.A. LaFountain III, analyst for Needham & Co. in New York, said the steady fall in workhorse PC100 prices could throw all DRAM producers back into the red. Micron, one of the few DRAM makers to post a recent profit, earned a modest $22 million in its second fiscal quarter after two quarters of losses. But LaFountain wondered whether the DRAM glut would cut prices faster than top-tier suppliers, like Micron and Samsung Electronics Co. Ltd., can reduce production costs.
Samsung reported contract-pricing pressure specifically for 8-Mbit x 8 PC100 SDRAMs, but said supplies of 16-Mbit x 4 were still tight. Some higher-density chips, though still in their introductory market stage, were also suffering, according to independent distributors, with certain configurations of 128-Mbit SDRAMs dropping sharply this past week to new lows of between $30.66 and $37.
"I think it's temporary," said Avo Kanadjian, vice president of memory marketing for Samsung Semiconductor Inc. in San Jose. "But it doesn't help that it's coming in the second quarter, which is traditionally our slowest season."
Ironically, prices for trailing-edge DRAMs, such as EDO and fast-page-mode, have continued to rise. Demand for older memory types remains strong from telecom-equipment and computer-peripheral OEMs, as well as from large PC-server builders. Supplies of these parts continue to tighten as the biggest DRAM makers shift production lines rapidly to higher-speed SDRAM products.
Danny Lam, analyst at Fisher-Holstein Inc. in Wilmington, Del., said falling PC100 SDRAM prices to some extent follow the usual second-quarter slowdown in OEM demand, especially from PC buyers. He expected the cycle will take its traditional upturn in the third quarter, but cautioned that the industry is "seeing more volatility in the market with wider swings of the business cycle."
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