As memory makers adjust their product mixes, PC DRAM prices continue to rise. It’s also contributing to tighter supply. The global average contract price of PC DRAM increased 7.4 percent in September, reaching $14.50, according to DRAMeXchange, a division of TrendForce. Spot pricing for DRAM chips also rose significantly in September, up by as much as 19 percent.
Tight supply is attributed to the DRAM industry’s shift to mobile DRAM production in the third quarter, expanding the share to 40 percent of its overall output, according to DRAMeXchange. This reduced the output share of PC DRAM to less than 20 percent.
“At the same time, the stock demand from notebook and smartphone clients was at its peak,” said DRAMeXchange. “The number of new notebooks carrying 8GB DRAM modules (especially enterprise models) has increased sharply ahead of the peak sales season at the end of the year.”
DRAMeXchange expects the average contract price of PC DRAM to reach its highest point in two years in the fourth quarter of 2016 due to “stronger-than-expected notebook demand worldwide.” The increase is pegged at nearly 30 percent.
“The price hike in the spot market for DRAM chips has been more significant,” said Avril Wu, research director of DRAMeXchange, in a statement. “In September, the average spot prices of 4Gb DDR3 and DDR4 chips rose 19 percent and 15 percent respectively compared with the prior month to $2.10 and $2, indicating that the market demand continues to outpace supply.”
“Since the third quarter, PC-OEMs have become more willing to accept premium prices for PC DRAM as to secure the volumes they need,” Wu added “In the fourth quarter, the PC DRAM market will witness an even larger price hike. The undersupply problem will worsen as well due to DRAM makers underestimating the increase in demand.”
Other market researchers agreed. IC Insights reports that the average selling prices (ASPs) of DRAMs started to strengthen in the late second quarter of 2016. Analysts expect pricing to continue increasing through the end of the year and into 2017.
The Semiconductor Industry Association reported that DRAM sales led growth in the semiconductor industry in July. "After months of lagging sales, the Americas region was a bright spot in July, posting 3.3 percent growth to lead all regional markets,” said John Neuffer, president and CEO, Semiconductor Industry Association, in a statement. “Meanwhile, most major semiconductor product categories saw increased sales in July compared to the previous month, with DRAM leading the way with 7.1 percent growth."
“The boost to DRAM ASP is expected to come from demand for enterprise (server) systems, which have been selling well due to the need to process “big data” (e.g., the Cloud and the Internet of Things),” according to IC Insights. “Also, low-voltage DRAM continues to enjoy solid demand for use in mobile platforms, particularly smartphones. Demand from new smartphone models is expected to help contribute to increasing DRAM ASPs through the end of this year and into 2017.”
However, IC Insights’ analysts believe the upward trend for DRAM pricing may be short lived as two China-based companies - King Technology in Hefei, China, and Fujian Jin Hua IC Company - plan to enter the DRAM marketplace beginning in late 2017 or early 2018. This could result in lower pricing.
Tight supply also led many PC OEMs to finalize their fourth quarter DRAM contracts in September, according to Wu. “Price negotiations for fourth-quarter contracts occurred earlier this year because DRAM suppliers have hastily shifted a large portion of their manufacturing capacities from making PC DRAM to producing products for the server and mobile markets.”
Another issue contributing to the short supply are yield rates. “Some suppliers have not raised their yield rates for 20-nm and 21-nm processes to expected levels,” said Wu. “This means that the industry’s overall PC DRAM output is unlikely to even satisfy the originally estimated demand. Under the circumstances, PC OEMs are frantically building up their DRAM inventories,” she added.
At the same time, buyers need to keep an eye on price hikes and shortages in the NAND flash market. Wu expects price increases of about 10 to 15 percent for eMCP products in the fourth quarter to due shortages.
“The intense competition for PC DRAM supply is causing price hikes for other memory products as well,” added Wu. “The global average contract price of server DRAM has risen by 10 percent since the start of the third quarter.”