Kingston adjusts 2GB module up by 30pc leading to upward spot market pricing

TAIPEI, TAIWAN: According to DRAMeXchange, Kingston, the worldwide memory module leader, adjusted DDR2 2GB module to $23.5 from $20.

Currently, the most updated price is $26.5. This movement also lead to the upward pricing trend in spot market, resulting in the 32 percent rise in DDR2 1Gb 800Mhz to $1.45 from $1.10 in mid-July, while DDR2 1Gb eTT hiked 37 percent to $1.44 from $1.05 on July 15. DDR3 1Gb 1333Mhz also nearly reached 30 percent to $2.12 from $1.65 on July 15.

Kingston lowered 2GB module price to $20 from $23 for the sake of stimulating sales and smoothed inventory level with negative view toward DDR2. In July, Kingston reveals the concern toward DDR2 supply in 4Q09 given the boosting demand from PC-OEMs and aggressive transition to DDR3 by Elpida-most important DRAM supplier for Kingston. It is believed that Kingston is seeking to secure the DDR2 supply in 2H09 by re-financing to PSC.

DDR2 shortage is expected in spot market; 1Gb chips will likely to reach $1.5 and likely to go higher

Elpida, PSC and Nanya are regarded as the main suppliers in spot market accordingly. Elpida is said that their DDR3 wafer-in portion will be around 40 percent of total commodity DRAM while Nanya will apply Micron’s technology to produce DDR3.

However, DDR2 will remain the mainstream transaction target in spot market by the year end and DDR3 portion is estimated less than 10 percent. Therefore, DDR2 products will face shortage in spot market and $1.5 will likely to be achieved.

According to our survey about DRAM consumption, Kingston can be ranked in No. 2 place that consume more DRAM than Dell and Acer. Kingston has always retained good relationship with DRAM vendors.

In order to secure the DRAM supply, Kingston tends to be the angel to DRAM vendors when they are in troughs. Before 2008, around 50 percent of ProMOS shipment went to Kingston but that situation changed since ProMOS couldn't produce 1Gb chip afterwards.

With the expanded capability that Rexchip has, Kingston’s relationship with Elpida has gotten closer. Relatively high portions of Elpida’s output in PSC and Rexchip eventually went to Kingston. However, DDR2 in spot market will be influenced under the aggressiveness of DDR3 transition of Elpida.

DRAMeXchange expresses that in the beginning of this year, PSC worked hard negotiating with Kingston regarding to the bailout plans and the negotiation turns positive when $158 million ECB redemption plans are agreed by 96 percent of bondholders.

In 7/9, PTI declared to inject $17 million to PSC through Kingston. That is, total bailout funding for both PTI and Kingston amounted US$125M and the money is limited to the use of daily operation and debt payment. At the meantime, PSC will largely expand DDR2 capacity to meet demand from Kingston.

With the aggressiveness DDR3 transition of two major suppliers in spot market, Elpida and Nanya, PSC will become the other major supplier for Kingston given the expanded capacity.