DRAM production cuts reached 22% world wide, 55% in Taiwan, showing signs of rebound

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DRAM production cuts reached 22% world wide, 55% in Taiwan, showing signs of rebound

Taipei (Taiwan) – DRAMeXchange is reporting that in the period from September, 2008 through the end of the year, DRAM makers have cut back on wafer processing by 22% world-wide, with a 55% reduction in Taiwan. This reduction is in response to falling chip prices and a major inventory oversupply – and appears to be working.

Since 2007, DRAM chip prices have plunged continuously for seven consecutive quarters. This has resulted in $10 billion in lost revenues in 2007 and 2008. $4.2 billion of that figure directly affects Taiwanese DRAM makers.

The decreases in price have come from lower-than-expected demand as well as an inventory oversupply caused by a 12″ (300mm) wafer conversion push in 2006. The cutbacks in production have now reached 22% world-wide with some Taiwan manufacturers reducing capacity by up to 55%. These reductions have been deemed necessary to fight the oversupply and price drops. But is it enough?

Spot chip prices have shown some rebound in December. The first to move were the DDR2 1Gb eTT chips which rallied up 75% from mid-December until now (mid-January). The 1H January contract prices are also showing signs of stabilizing and have stopped declining. Manufacturers now believe that once the PC OEM demand recovers, a price rebound may well be seen.

DDR2 1Gb eTT chip prices have fallen below $1 in mid November, and hit a rock bottom of $0.59 in mid December. They again reached $1 on January 7 and are currently on their way up (with a range of 10%). The DDR2 667 MHz 1Gb chips have also climbed from $0.78 to $0.85 on average (with a range of 9%). It is believed chip prices will remain above $1 through the 2H of January.

In the contract markets, the 1H January prices remain stable with 1 GB DDR2 667 MHz prices at $8 and 2 GB DDR2 667 MHz at $16. The price drops of 64% since last July have also finally stopped.