| Memory price
hike hits channel
By Nirmal Chandrasena, PC Authority
Tuesday,
March 30, 2004 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.”
From:
http://www.itnews.com.au/storycontent.asp?ID=7&Art_ID=18950
|