Prices for DRAMs Continue to Climb while NAND Flash ASPs Drop

Prices for DRAMs, with the exception of graphics applications, has increased by 3 percent to 6 percent in the first quarter (Q1) of 2018, according to DRAMeXchange, a division of TrendForce, resulting in a 5.4 percent increase in global DRAM revenue. Graphics DRAMs experienced the largest price hikes, increasing by 15 percent in Q1.

“Most PC OEMs have concluded negotiating their procurement contracts for the second quarter (2Q) of 2018,” said Avril Wu, senior research director of DRAMeXchange, in a statement. “The average quote of mainstream PC DRAM modules from the first tier DRAM suppliers came to $34 this April, showing a 3 percent increase from the average price in Q1 2018.”

For server DRAM, supply remained tight in Q1 resulting in higher average selling prices (ASPs), despite the product mix adjustments by suppliers, reported DRAMeXchange. Although the average revenue growth for the global DRAM market was 5.4 percent in Q1, the top three suppliers of server DRAMs saw a 10.4 percent increase in revenue. In March, DRAMeXchange forecast that server DRAM price increases would be about 5 percent.

Wu expects that the general price increase and the cost improvements related to technological advances will keep driving profit and operating margins for the top three suppliers in the second quarter.

“However, the profitability of the top suppliers is also far exceeding the buyers’ acceptable limit,” she said. “For example, Samsung’s operating margin in Q1 2018 translates to a gross margin surpassing 80 percent. This implies that the [price] hikes in quotes will likely start to moderate.”

DRAM capacity plans for the top 3 suppliers

Samsung’s strategy is to maintain its 18-nm output share, which will increase from 50 percent to 70 percent by the end of the year. DRAMeXchange said Samsung has a big lead over competitors in terms of cost and margins because products based on 18-nm technologies offer a 20 percent improvement in cost compared to 20-nm products.

However, Samsung’s DRAM line on the second floor of its Pyeongtaek plant is being readied for production and will represent the company’s transition to its next-generation 16-nm process, said Wu.

Meanwhile, SK Hynix is focused on raising the yield rate of its 18-nm process that began production at the end of 2017. “SK Hynix is sticking to the same capacity expansion plan, so its second fab in Wuxi is on track to finish construction at the end of 2018 and will be in operation in 1H19 at the earliest,” Wu said. The 21-nm process will remain the mainstream technology for the company in the second half of 2018.

Micron’s subsidiary Micron Memory Taiwan (formerly Rexchip) is now 100 percent on the 17-nm process, while the other subsidiary Micron Technology Taiwan (formerly Inotera) has started to migrate from 20 nm to 17 nm in Q2 and will ramp up to 17-nm production in the second half of 2018, according to Wu.

“It is noteworthy that even with the influx of orders from data centers, the average share of advanced processes of server DRAM has remained low, as Samsung is the only supplier in the industry to have successfully expanded the share of its 18-nm technology in 2018,” said Mark Liu, senior analyst at DRAMeXchange, in a statement. “The migration of SK Hynix and Micron to the 18-nm and 17-nm manufacturing processes, respectively, have been constrained by their limited yield rates in Q1.”
NAND Flash status

The slight oversupply in the NAND flash market in Q1 2018 is expected to continue into the second quarter, resulting in continued price declines, according to DRAMeXchange. Overall, price declines are expected to be about 5 percent, according to analysts. At the same time, manufacturers have slowed down their production expansion due to market trends in the first half of the year.

“Increasing demand cannot offset the high supply resulting from improvements in 3D NAND flash production capacity and yield rate,” reported DRAMeXchange. “Consequently, the suppliers, who face higher inventory levels, have to further adjust the eMMC/UFS prices downward.”

DRAMeXchange explained that suppliers typically decrease the prices of high-capacity UFS (128/256 GB) products in order to increase the average memory content of mid-to-high range smartphones, and drive memory content upgrades in models that have 64/128 GB eMMC/UFS. This could lead to contract prices drops of up to 5 percent for eMMC and 5 percent to 15 percent declines for UFS in Q2.

However, this downward pricing trend may change in the second half when overall demand increases due to seasonal upticks, including Apple’s stock-up for new iPhones. In addition, demand in the channel markets are forecast to recover due to the lower prices. As a result, fluctuating prices of NAND flash is expected to stabilize in the second half of 2018. It also means that the price declines of eMMC/UFS memory and PC/enterprise SSD are expected to moderate.