Memory price hike hits channel

The local channel is reporting massive increases in DDR memory prices due to demand outstripping supply.

Brad Dowe, CEO at builder and distributor Legend claimed a 24 percent increase in DDR memory pricing in March. He confirmed that the entire channel market is undersupplied at the moment. 'The channel has had very little stock for more than one month now, and as such there [also] has been very little stockpiling,' he said.

Danny Wang, business development director at Melbourne-based distributor QD Innovative, claimed the DDR memory supply issue may be due to issues encountered during new DRAM manufacturing processes.

He said that there are rumours that a major manufacturer has discarded up to 3.5 million DRAM chips due to problems with a new manufacturing process.

Wang noted that output could be suffering as manufacturers attempt to cope with the newly adopted procedures. He said some manufacturers might simply lack the knowledge to work with the new processes.

He said that prices will keep increasing over the next few weeks and though manufacturers are trying to find a quick solution to solve their existing problem, many know that this will not happen overnight.
'DDR RAM prices will shoot up much higher in the weeks to come. Currently there is no indication of when it will settle or become stable again,' he said.

DRAM supply versus demand is finely balanced, but worries about low levels of channel inventory and robust demand from a healthy PC sector are helping shift the balance of power in contract price negotiations in favour of DRAM vendors, said Dorothy Lai, principal analyst for Gartner Research.
'DRAM suppliers are using this leverage to increase pricing for near-term shipments in the hope of setting profit-maximising equilibrium price levels ahead of the second half of 2004,' she said.
'Combined with favourable spot market pricing, [this] has enabled DRAM vendors to increase contract pricing in recent weeks,' she said.

Lai added that DRAM vendors are hoping to raise prices incrementally in coming weeks. 'There will be easing of price but overall we expect prices to continue to rise over at least the next 1.5 months.'

Dowe agreed: 'Industry-wide, we see this as the start of an overall tightening in memory supply, reversing the trend of the last four years.'

Craig Quinn, product manager for systems at ASI, said DDR memory prices had risen by about 20 percent in March. 'We think they will level off in April,' said Quinn, adding an educated guess that they may begin to drop in May.

QD's Wang added: 'I personally believe that it will be at least another month or two before we get to see an indication of which way the RAM prices will go.'

Wang said that one reason for this is the Comdex IT show that took place in Hanover this month and the Computex show due to take place during the first week of June in Taipei. 'Usually demand increases after these IT Expos,' he said.

To better forecast supply, ASI's Quinn said distributors need to be acutely informed about market developments.

He also advises system builders to take the volatility of memory into consideration when quoting for the price of a system.

Dowe recommended resellers align themselves with authorised distributors right now. He said that should the market tighten much more, allocation may be required.

Wang recommends resellers stock what they can use or know how quickly they can turn the stock around. 'From past experience, many tend to take advantage of this pre-price hike,' he said, 'but anything can happen -- there could be a miracle solution overnight and the whole price rise situation may be turned around completely.'