DRAM contract prices fall due to oversupply

DRAM contract prices are dropping sharply as oversupply mounts, according to a report by research group DRAMeXchange.

DDR3 2Gb contract prices dropped by 4.5 percent to $42 from $44 in the second half of July, while DDR2 contract prices also dropped by 8.75 percent to $36.50.

Despite the drop in contract prices, DRAMeXchange found that there is no major impact on the earning performance of DRAM vendors. It found that Samsung and Hynix retain a higher than 40 percent gross margin, while Elpida manages a 35 percent gross margin.

There is a substantial oversupply of DRAM chips, mainly manufactured for the peak season in the fourth quarter of this year, but the report found that most vendors will not sell below cost to cut down the numbers.

DRAMeXchange also found that die size will be effectively shrunk in 50nm technology. It expects that 2Gb chips will become the mainstream standard for the second half of this year, with costs ranging from $1 to $1.2 in terms of 40nm technology nodes, which is 20 percent cheaper than 50nm or 50 percent cheaper than 60nm.

Most vendors are cautious about devoting capital to process migration, but Korean vendors are still pursuing aggressive migration moves, with Samsung already launching 56nm and 46nm chips. 35nm processes should be out in the last quarter of 2010 and will account for between 5 and 10 percent of total output. 

Elpida is expected to skip the 50nm process and launch 45nm in the third quarter of this year, while Rexchip will migrate fully to 45nm technology in the first quarter of 2011, which will see a flood of new DRAM chips from multiple manufacturers.