DRAM inventory rises

Josephine Lien, Jessie Shen, 24 August 2012

PC OEMs now have two to three months of DRAM inventory on average, up from the four to six weeks previously. The surge is being caused by sluggish PC sales as consumers hold back purchases in anticipation of new Windows 8 devices, according to sources at memory makers.

DRAM inventory at some PC OEMs which have performed relatively weakly has piled up to as much as five to six months, the sources indicated.

PC end-market demand has been weak thus far in the third quarter of 2012 despite the period being the traditional peak season, the sources said. The arrival of Windows 8 in late October could be a major cause of disappointing PC sales, and OEMs are now having a hard time digesting the DRAM stockpiles they built previously, the sources noted.

PC OEMs usually replenish DRAM inventory ahead of the third quarter peak season. The bankruptcy of Elpida Memory also encouraged OEMs to step up chip purchases in anticipation that Elpida might suspend partial production at its plant due to lack of funds, the sources said.

With DRAM inventory at PC OEMs rising quickly, prices of memory chips are likely to fall further later in the third quarter, the sources observed. In August alone, contract prices for DRAM memory are set to slip as much as 10%, the sources estimated.

Although some chipmakers have moved to scale down their DRAM output, prices are still continuing their downward trend, the sources said.

Elpida and Rexchip Electronics reportedly have cut their production by 25-30% with an aim to stop DRAM prices from falling further. Meanwhile, Samsung Electronics and SK Hynix have allocated more production capacity for non-PC DRAM chips.