Featured Story: Memory Market Runs Hot and Cold

Sunday, 13 May 2007 18:00

Memory Market Runs Hot and Cold

Todd Banker

Watch for…

• Upward trends in DDR pricing as back-to-school builds begin
• NAND flash inventory levels to thin as MLC applications expand

2006 was a record year for memory sales on the open market, but sales slowed in early 2007 and prices leveled off as Q1 drew to a close.  Smith & Associates Memory Commodity Manager Todd Banker reviews the reasons behind the market’s strength in 2006 and offers a glimpse of what lies in store for the remainder of 2007.

DRAM Looks for a Driver
DRAM supply was tight in 2006, driving prices up for much of the year.  Several memory manufacturers put product on allocation as demand exceeded projections, and prices rose as supply tightened.

During late 2006 and early 2007, some PC makers missed their retail sales targets, and DDR2 manufacturers caught up with deliveries on items that had previously been on allocation.  This caused prices to decline during January and February 2007, then level off in March.

An expected surge in retail PC sales following the Q1 release of Microsoft Windows Vista failed to materialize.  As a result, DDR2 prices declined again in April and several chip manufacturers found themselves overstocked.  Chip manufacturers are hopeful for a strong back-to-school season in PC sales, as PCs will remain the driving factor in DDR2 DRAM.  Current increased activity on the open market supports this optimism.

DDR1 and SDRAM prices were steady for the first quarter of 2007.  Supply in these commodities was balanced to tight as a number of memory manufacturers shifted production to higher-demand products such as flash.  Legacy PC upgrades, as well as television set-top boxes and other consumer electronics continue to account for the bulk of SDRAM and DDR1 demand.

Emerging Technologies… Here in a Flash
Consumer electronics remain the driver for flash memory sales.  Continued advances and heavy consumer demand for cellular phones, PDAs, hand-held PCs, MP3 players, video games, and similar devices have kept the flash market healthy.  Large capacity solid state drives using flash memory could also increase consumption as their use in laptop and desktop PC applications advance.

For the first half of 2006, the NOR flash market was pushed by a combination of short supply of Intel Strataflash NOR chips and a change to updated die revisions. As a result, open market prices rose to near twice contract pricing. At the beginning of Q3 2006, NOR flash supply caught up to demand, and open market prices fell back to parity with contract pricing.  Spot shortages from end users persisted through the end of last year.
NAND flash supply was plentiful in early 2007, causing prices to decline.  As Q1 drew to a close, however, NAND supply tightened and prices began to stabilize.  In particular, 8GB and 16GB NAND supply have become scarcer, causing prices to increase since mid March. 

Multi-level cell (MLC) flash has traditionally been slower and cheaper than single-level cell (SLC) technology.  However, MLCs are gaining market share in light of the options available for ‘stacking’ the MLCs to gain density.  With specialized controllers, MLCs’ performance can be improved to make them as fast as their SLC counterparts, but MLCs are available at a lower price.  Look for MLCs to be the focal point of NAND chip manufacturing, with pricing remaining relatively stable through the rest of 2007.

Among the most promising applications for MLC NAND flash is Solid State Drive (SSD) technology.  As reported in the April 30 issue of MarketWatch, Dell recently introduced solid state drive options on two notebook models.  SSD prices are likely to drop as applications increase, and capacity will likely increase as flash memory technology matures.

In addition to flash, uses of Graphic DDR1, 2, & 3 in consumer electronics have also increased, causing spotty shortages in the marketplace.  Items like DVRs, MP3 players with video, HDTVs, and wireless handsets are driving a healthy market as supply and demand have been balanced and pricing stable on most densities and speeds.

OPEN MARKET OUTLOOK
Smith has seen steady excess business and requirements in PC133 and DDR1 modules for the server and PC upgrade markets, and is working closely with our OEMs to maximize returns on their unconsumed inventory in these products.

As supply balances out this summer, OEMs will have opportunities to lower direct costs on mid-range sized NAND flash discretes through open market purchases, or to fulfill shortages in lower density NAND materials that tend toward tighter supply.  Smith works closely with OEMs and EMS providers to lower their overall memory costs with large spot buys for full production runs or just-in-time spot buys to keep lines on time.

Buyers can take advantage of open market opportunities in memory and other commodity components by working with a Smith & Associates representative to maintain optimal inventory levels and purchase or resell product in advance of shortage or oversupply situations.

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