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DRAMeXchange indicates WW DRAM capacity cut has surpassed 22% in January 2009

15 January 2009 Semiconductors

Taipei, January 13, 2009---  DRAM chip price has plunged since 2007 and suffered loss for almost seven consecutive quarters. WW DRAM vendors have lost 10 billion USD in 2007 and 2008, among this Taiwanese vendors stands 4.2 billion USD. Main reasons were the optimistic view toward the memory demand and the huge 12 inch capacity expansion in 2006. Capacity started production in 2007 and resulted in severe oversupply, and has caused DRAM price to drop. According to the DRAMeXchange's statistics, from Q107 to Q308, the WW 12 inch DRAM fabs had grown 56%, and 57% of the 8 inch Fabs had retired. The total average capacity had grown 21%. OEM had considerably raised the DRAM content per system to over 2 GB among PCs in Q208, it still could not follow the speed of DRAM capacity expansion. When the economy quickly slowed down in 2H08, the financial crisis became the last straw that broke the DRAM vendors’ backs, and the vendors started capacity cut in September 2008.

According to DRAMeXchange’s statistics, the number of new wafer in from last September to January 2009 decreased 22% world wide, and among this, the Taiwanese vendors’ capacity decreased most and has reached 55%. Obviously after the DRAM vendors announced capacity cut in September 2008, they still decreased their wafer in continuously even higher than the percentage they claimed. Furthermore, with the strategy of limited shipment, the spot chip price started to show signs of rebound in December. First the spot DDR2 1G eTT chip price sharply rallied over 75% from mid December to now. The 1H January contract price first time showed signs of price stableness and stopped declining. After the PC OEM demand recovers, the price rebound is worth hoping.

In the spot market, the DDR2 1Gb eTT chip price fell below 1 USD in mid November 2008 and hit 0.59 USD bottom, after the effect of capacity cut and limited shipment strategy started, the chip price began to rally from mid December and once again reached 1 USD in January 7th. Last week (Jan 6th to Jan 13th) the DDR2 1Gb eTT price started climbing from 0.92 USD to 1.01 USD with the range of 10% upside. The DDR2 667 Mhz 1Gb also rallied from 0.78 USD to 0.85 USD, with the range of 9%. From the market observation, with the effect of capacity cut and the shipment control strategy, previous procurement wave has come to a halt as the Chinese New Year is approaching soon and is waiting for future developments in the spot price market.

In the contract market, the 1H January contract price remained stable, the DDR2 667 Mhz 1 GB and 2 GB average prices were 8 USD and 16 USD. The 64% of price dropping from last July had stopped. From the market observation, with the coming Chinese New Year and the DRAM procurement demand in the E.U.and the U.S., and the DRAM vendors are willing to keep the chip price above 1 USD, the total market supply will be controlled, and incubating the 2H January contract price rally momentum.

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