DRAM contract prices stabilized at $12.50 in June after dropping 62 percent from October 2014 at a high of $32.75, according to DRAMeXchange, a division of TrendForce. However, analysts expect DRAM prices to start to rise in the third quarter, increasing from four to eight percent.
“After being on a downtrend for almost two years, DRAM contract prices stabilized in June as most negotiations settled at $12.5,” said Avril Wu, DRAMeXchange research director, in a statement. “Due to the tightening of supply, first-tier PC OEMs also started their third-quarter contract negotiations earlier in June.”
DRAMeXchange attributes the price increases for both DRAMs and NAND flash to suppliers reducing their PC DRAM output and tight supply of NAND flash along with a power outage at Samsung’s Xian fab.
Other researchers also believe the market will start to transition in the third quarter. “Ongoing weakness in consumer PC demand and oversupply will hamper memory prices for DRAM and NAND until the third quarter and result in revenues shrinking by 20 percent and 10 percent, respectively,” according to a recent IDC report.
“PC demand remains in a slump, and Windows 10 licensing scheme, which sets fees according to system specs, further discourages PC vendors from increasing the memory content per box for their products. With prices of PC DRAM products falling to almost their cash costs, South Korean suppliers steadily reduced the share of this application in their respective product mixes during the second quarter,” according to Wu.
However, Wu believes demand from mobile and server applications will be the key driver behind the increase in DRAM contract prices in the third quarter. “Fortunately, the content per box of smartphones worldwide this year is projected to grow considerably by 36% compared with 2015, and new flagship smartphones that will be available during the second half of the year will carry a maximum of 6GB. Server DRAM’s content per box will also increase by 25% year on year to 110GB. On the whole, demand from mobile and server applications will effectively consume the excess capacity as a result of suppliers adjusting their product mixes.”
Tight supply of NAND flash also is expected to impact DRAM prices. The power outage at Samsung’s memory fab in Xian, China on June 18 cut a day’s worth of NAND Flash and DRAM supply for memory module makers, resulting in spot prices for both products to increase, said Wu. As an example, the average spot price of DDR3 4Gb increased by nine percent to $1.65 by July 1.
Wu expects these factors along with technology migration efforts will reverse the downward price trend in the DRAM market. These include Samsung’s 18-nm process moving into the mass production phase and increasing wafer capacity of 20/21 nm processes at SK Hynix and Micron.