CEBIT - DRAM prices rise but observers remain wary

CEBIT - DRAM prices rise but observers remain wary

An uptick in the spot market price for DRAM (dynamic random access memory) chips at the end of last week could be the first sign of a recovery in the market, said some industry observers. Yet others remain cautious after nine months of continuing price declines have ravaged the financial health of the chipmakers.

DRAM chips are used as the main memory inside personal computers and their prices have been falling since the middle of last year, when PC sales started slowing down and inventories began to build up at the chipmakers.

The spot market price for bellwether 128M-bit DRAM chips languished around record lows of $US4 per chip for most of last week. Although in Asian trading yesterday the price had risen to around $4.25 per chip for devices from brand name makers, according to data from market research company Independent Commodity Information Services - London Oil Reports (ICIS-LOR).

That rise, although slight, was a rare piece of good news for the industry, which recently has become more accustomed to hearing news of further price declines and profit warnings from manufacturers because of the low prices.

"The market should have hit bottom," said Gerd Schauss, associate director for DRAM marketing at Samsung Semiconductor Europe, the European semiconductor unit of South Korea's Samsung Electronics, which is one of the world's largest manufacturers of computer memory chips.

"It is not very clear on the price trend. We have seen some upturn in the US recently and we should start to see an increase in the [amount of memory installed in each PC]," he said speaking at the CeBIT trade show.

Other market watchers said they had too seen some positive signs in the market although remained cautious.

"From what I saw, there was some interested buying from the trader side," said Steve Tan, a DRAM market analyst with ICIS-LOR in Singapore. Still, Tan said he remained downbeat on the market despite the recent price increase as there were no real signs of support for the higher prices.

"Fundamentally, the market is still weak. There is not much stock in the distribution channels so if there is a slight increase in demand it will be felt slightly (in the pricing)."

Schauss echoed Tan's cautious stance and summed up why so many people in the industry are still watching the market warily. "It is very hard to imagine the price will continue to go down but then six months ago nobody would have predicted the large falls we have seen," he said.

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