The DRAM spot market has logged impressive gains over the past two days, with some key commodity components climbing more than 20%. This spike in pricing is partly due to a shortfall in supply. Over the last six weeks, in light of deteriorating commodity pricing, DRAM companies have adjusted their product mixes away from commodity DRAM and into legacy and specialty DRAM (DDR, DDR2, and Mobile DRAM). Additionally, the painful pricing environment prompted some less competitive manufacturers to throttle output slightly. The combination of these two activities has moderated the supply of commodity DRAM and thereby brought the supply and demand into better balance.
But the rebalancing between supply and demand is only partly responsible for the recent spikes. Although the run-up to Chinese New Year is nearly over, this spike is likely a manipulation of the market in an attempt to lift prices dramatically ahead of the holiday. Identifying who is manipulating the market would be pure speculation, but the list of entities that would benefit from a sudden and dramatic lift in commodity DRAM prices is not too long.
The fundamentals of the DRAM market have not changed over the course of the past two or three days. There is still ample supply and soft demand. This is a dynamic that will shift slowly but will persist for much of the first half of 2011. Look for a real about face in DRAM prices in the second half of 2011 – this one looks spurious.