Guidance and Visibility

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DRAM contract price falls limited in 1HApr, temporal NAND rebound not to grow contract prices

DXI rebound highlights DDR price resumes

DXI reversed its downward trend from Mar30 (up from 2,894 to 3006) and signifies the stabilizing prices of DDR at spot market recently. Although DDR2 still suffered slight drop last week, the stable DDR prices hold overall DRAM spot prices firm and reflected in the rebound of DXI accordingly. DRAMeXchange observes that DXI trended downward since late Jan with the index once nose dived from 3,158 to 2,184 (or 174 points) and the index resumed to normal levels after bottomed out.

We observe that DDR 256Mb eTT (uTT) showed the strongest price rebounding sign (up 12% to US$1.91) last week, thanks to the rumors about PSC's possible supply suspension. Demand of DDR continues holding a stronger trend than DDR2 amid Intel's clearance on 865G chipsets in 1H06. Those 865 chipsets with reduced prices are flooding at downstream motherboard makers and spur DDR demand to pick up further.

Price of DDR 256Mb 32Mbx8 400 MHz grew by a slight 1% to US$2.01 while the higher density 512Mb DDR also grew by 3.8% to US$4.10. DDR2 prices still remained weak last week with DDR2 512Mb 64Mbx8 533MHz dipped by 2.1% to US$4.72.





DRAM contract prices to stay flat in 1HApr

Checking the ongoing price negotiation trend on 1HApr DRAM contract prices, DRAMeXchange believes DDR2 512MB module should stay flat or drop by a slight 2-3%. Overall DRAM contract prices should not fall as our initial expected 5% as supply of DDR2 is still in short. Although supply of DDR2 should be improved in Apr in compare with the previous two months, its present shortage should help stabilizing overall DRAM (including DDR) with stable price trend in April.

Thanks to the escalating shipment for DDR2 667MHz, DRAMeXchange forecasts that DRAM makers should able to see better than expected ASPs in 2Q despite dropping DRAM prices. We see demand for DDR2 667MHz has been picking up recently and such specification of chips are now enjoying a price premium of 10-15% over 533MHz. Transaction volume for DDR2 1GB 667MHz SO-DIMM for notebook applications is also rising and results in an over 15% price premium over DDR2 1GB 533MHz Unbuffered DIMM.

Despite NAND Flash prices snap back, shortage illusion should diminish on anticipated contract price falls

NAND Flash spot prices for 1Gb-16Gb surged by 2-13% during Mar31 to Apr1 but only 1Gb reports a mere 2% price growth on a week-on-week basis. Does the price rebound signify that the NAND Flash market has finally reached equilibrium? Or spot prices have already hit bottom? DRAMeXchange believes not.

We believe this is only a temporary mismatch of supply and demand as spot customers were forced to source for NAND Flash supply at higher quotes to meet urgent demand amid the insufficient TSOP package chip supply.

This false supply shortage illusion will not last over a week as April NAND contract prices will be release next week. The anticipated price drops amid flattish demand and escalating supply should dispel this temporary NAND shortage illusion.

Last minute orders spur demand but not in an industry-wide level

The entire spot market highlights the chaotic demand and supply mismatch amid the delayed contract deals. The persisted oversupply not only delayed the price negotiation but also shipment to smaller scale customers at the spot market. These customers who were unable to secure expected amount of stock from contract market were forced to source stocks from the spot market, regardless the quotes they took were higher. Although the delayed shipment at the spot market did spur demand, transaction volume kept minimal as players were still aware of their inventory levels. They only source the exact amount that they look for in order to avoid any inventory loss.

Oversupply situation to induce finished goods demand however its supply remains limited

Since NAND Flash component prices keep sliding on a daily basis since Feb06, module houses and OEMs tend to source finished goods (i.e. memory card) rather than components (i.e. TSOP package chip) in order to avoid potential loss from the prolonged lead time. However, supply is not sticking in line with demand and more NAND are shipped in wafer form rather than in chip or finished goods form in March. This unbalance demand/supply scenario is especially strong for the mainstream chip 4Gb.






PC market watch: International vendors cultivate China expansion to grow potential revenues driver

Toshiba fosters China NB sales via complete " localization "
After extending its presence at the China market for over a decade, Toshiba should enjoy the blossom of complete localization on production, human resources and channel management.

Production Toshiba starts investing in China from 1995 and its market share of notebook (NB) grew 8% within a year. In line with taking the lead in China NB market, Toshiba established its Shanghai production plant in Jun00 and extended its production base to Hangzhou in 2002 in attempt to strengthen its NB production for global market. The company had also relocated its Philippines capacity to this site in 2005 - further fosters its production core at China.

Human resources Ever since Ishiwatari Toshiro serves as the president of Toshiba Personal Computer & Network (Shanghai) from 2005, he aggressively grows the number of China professions at the company. Gang Wang is appointed as the company vice president and CEO in Nov05 and responsibles for the management of products, market, sales and services at China. Built on the 11 years of service at Lenovo and the previous duties at TCL, Wang is an expertise on China's IT industry. After taking the CEO position at Toshiba, Wang establishes a solid management team with local professions right away.

Channel management Toshiba announced to adopt the multiple distribution agents mode rather than multiple distributors mode in late March, 2006 and the company plans to grow the NB direct sales spot number from the present 200 to 500. Toshiba will also partner with large-scale retailer in order to extend its coverage at channels and add efficiency to its supply chain partners.

Dell continues to expand R&D forces in China
In order to seek for revenues drivers aside from the steady PC sales at mature markets, international vendors like Dell have all grown their investments overseas. Take Dell for instance, the company reports its overseas market contribution hit US$80bn and the contribution ratio had shoot by 21% to 43% of overall sales through Jan3106.

China could be described as an indexical market for Dell among all oversea markets. Dell topped as the number three PC vendors in China but its share still kept under 10%. As the market share from China is far lower than its share at mature markets, the company announced to continue expanding at its CTC (China Technology Center) in late March in order to grow its market share on expanding R&D team resources at the region.

CTC was established at Beijing in 2002 and houses a team of ten professions at initial stage. Dell relocated the center from Beijing to Shanghai in 2003 and expanded the workforce number to 300. The number of workforce will further boost by another 200 by 2006. Among the planned expanded workforce, Dell will also recruit local graduates or offer internship. This center is mainly responsible for designing NB and DT and serves a key contact window for Dell's domestic suppliers in order to meet the growing numbers of partners at the region.