We have been saying for some time that semiconductor companies were investing in too much new capacity, that too much capacity means oversupply, and that oversupply means a brutal pricing environment.
According to the latest update from DRAMeXchange:
The pricing environment for the spot market remained weak, as demand was still sluggish. The DDR2 512Mb 667MHz tumbled to roughly USD 2.57, while the DDR2 eTT dropped to USD 2.05. In the contract market, prices fell as well, due to the removal of excess inventory by PC OEMs. Contract prices of the DDR2 667MHz 512MB were mostly finalized at USD 20 or even lower. The current declines in the DRAM contract price have been much bigger than originally expected. This has been mainly attributed to the weak seasonality in the PC market, and huge imbalance in the demand and supply chain.
The folks at DRAMeXchange are hopeful prices will soon bottom ahead of the second half selling season. Given the capacity expansion that took place so far, we think at best the decline will be slower.