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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Silver Super Bull who wrote (746)	9/17/2003 8:40:37 AM
From: russwinter	Respond to of 110194

Monday September 15, 6:22 PM Asia DRAM Report: Contract Prices Gain, Spot Mkt Wilts By Dan Nystedt Of DOW JONES NEWSWIRES TAIPEI (Dow Jones)--The computer memory chip market might be in a peak-season lull, but that hasn't prevented an unusual phenomenon emerging, in which contract prices have stolen a march on spot prices. Spot-market prices generally help determine contract pricing because they are a better gauge of demand. But spot prices have slipped over the past month as more PC makers buy dynamic random access memory chips on contract. That's good news for contract chipmakers like Samsung Electronics Co. (Q.SSE), the world's largest DRAM maker, but bad news for firms that depend on the spot market, like Taiwan's ProMOS Technologies Inc. (Q.PMT) and Powerchip Semiconductor Corp. (Q.PWC), which could see their profits slide in coming weeks. Spot-market prices have been hit by flagging PC demand from Europe - a leading buyer of spot-market DRAM - and a flood of chips from companies looking for cash to pay off debts, like Taiwan's Mosel Vitelic Inc. (Q.MVT) and South Korea's Hynix Semiconductor Inc. (Q.HYY). Adding to spot-market woes is the fact that Hynix has also been selling more chips on Asian spot markets since being hit by tariffs from Europe and the U.S, dealers note. In August, the European Union imposed a 34.8% import tariff on Hynix-made memory chips after ruling that the South Korean government had unfairly subsidized the chipmaker. A month before that, the U.S. finalized a ruling to slap a 44.29% import tariff on Hynix chips. That leaves spot-price dependent chipmakers on the sidelines as they wait for PC demand from Europe to catch up with the U.S. and Asia. "Demand from Europe usually picks up in the second half of September but so far that hasn't happened," said one DRAM trader. DRAM Makers Stand Firm On Contract Prices While that would normally spell trouble for overall DRAM prices, contract chipmakers are likely to enjoy continued gains. "Although the spot market is weak, I believe contract prices will continue to rise. The main DRAM vendors remain shoulder to shoulder and are holding prices steady and keeping inventories low, and are placing supply emphasis on (PC makers) rather than brokers and traders," said Matt Godfry, DRAM analyst at Semico Research Co. in an e-mailed response. According to DRAMeXchange, an online clearing house for the chips, the portion of DRAM chips sold by contract rose to 77% in August from 67% in January, while the spot market share contracted to 23% from 33% during the same period. Spot prices for the most widely used DRAM chips - double data rate chips that run at 266 megahertz - slid to US$4.65 Monday from US$4.75 on Aug. 15, according to DRAMeXchange. The next few weeks won't likely see much improvement in the spot market either. The PC market is in a peak-season lull: back-to-school sales have ended but DRAM purchases for restocking ahead of the holidays won't start until October. Conversely, DRAM contract prices have been climbing since mid-May, to a range of US$5.06-US$5.38 on Sept. 5, when they were last negotiated, from US$3.40-US$3.80 on May 20, according to DRAMeXchange. The rise in contract prices was spurred by an uptick in demand for personal computers during the second quarter that sent a number of market researchers scurrying to revamp their 2003 PC market forecasts. Last week, market researcher International Data Corp. raised its 2003 growth forecast for global PC shipments to 8.4% from 6.3%, citing a stronger-than-expected 9.6% expansion in the second quarter. However, the recent turn of events isn't necessarily gloom and doom for all spot-price dependent chipmakers. At least, not firms that can gain from a turnaround in European PC sales, like Germany's Infineon Technologies AG (IFX). One trader noted that the world's third-largest DRAM maker may reap a windfall ahead of closing its books for its fourth quarter ending Sept. 30 if PC demand in Europe kicks in. "They may sell off inventory to boost their numbers," she said. But that would then add to selling pressure on the spot market. Overall, companies that are selling chips on contract will benefit from steadily rising prices, while those that rely on the spot market can expect further turbulence. Table Of Average Weekly DRAM Spot Prices 15 Sept 8 Sept 1 Sept 25 Aug 18 Aug 128Mb SDRAM - $2.90 $2.89 $2.89 $2.89 $2.92 256Mb SDRAM - $4.19 $4.16 $4.15 $4.15 $4.16 128Mb DDR - $2.48 $2.49 $2.49 $2.49 $2.49 256Mb DDR-266- $4.65 $4.69 $4.65 $4.61 $4.76 256Mb DDR-333- $4.72 $4.76 $4.77 $4.74 $4.93 256Mb DDR-400- $4.77 $4.81 $4.82 $4.80 $4.94 128MB Rambus- $38.50 $38.62 $38.90 $38.90 $38.90 256MB Rambus- $76.70 $77.00 $77.20 $77.20 $77.20 *module price Sources - brokers, module makers, DRAMeXchange