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Contract DRAM prices keep sliding in July despite spot price surge

All News 16:38 August 01, 2019

By Kim Eun-jung

SEOUL, Aug. 1 (Yonhap) -- Contract prices for DRAM continued to fall in July due to high inventory levels and despite a recent surge in spot prices following Japan's export curbs on South Korea, an industry report showed Thursday.

DRAMeXchange, which tracks the memory chip market, said the average spot price increased 24 percent last month in the wake of Tokyo's tighter export rules on key chemicals for chips, but contract prices for major products like DDR4 8GB chips fell 10.5 percent over the same period.

A spot price is the current price traded in the market, while contract prices are negotiated as monthly or quarterly deals, creating price gaps between the two.

"The scale of the spot market is too small to relieve suppliers of their high inventory levels by any noticeable amount," DRAMeXchange said in the report. "Furthermore, end demand for memory products saw no improvement entering peak-season, putting contract prices on the slide yet again."

The market researcher said DRAM contract prices were driven by a supply glut rather than news of recent events circulating in the market, noting shipment of PCs and smartphones will drop by 4.8 percent and 5 percent, respectively, this year.

While some manufacturers recently announced plans to scale back production, DRAMeXchange pointed out the actual size of the cuts is "fairly limited," mainly involving phase-outs of older processes.

"An unresolved oversupply conjoined with the fact that the contract market forms over 90 percent of the whole DRAM market means that contract prices are still on the decline this month," it said.

SK hynix Inc., the world's second-largest chipmaker, said last week it will cut memory chip output and convert part of its DRAM fabrication line to image sensor production.

Its bigger rival, Samsung Electronics Co., said Wednesday it won't artificially reduce wafer input but will "flexibly respond to the changing market conditions."


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