DRAM and NAND Flash Prices Will Dive in Q1 2019

Both DRAM and NAND flash prices are expected to decline in the 10-percent range in the first quarter (Q1) of 2019. DRAMeXchange, a division of TrendForce, forecasts DRAM prices will drop by 10 percent or higher in Q1 while NAND flash prices will fall by nearly 10 percent.

This is a steeper slide than last quarter’s forecast that predicted a 5-percent drop in DRAM prices. The declines are attributed to increased supply, high inventory levels, and the looming trade war between the U.S. and China.

In an unusual shift for the DRAM industry, some contracts are now being negotiated monthly instead of quarterly, starting in the fourth quarter of 2018. In a rare move, said DRAMeXchange, prices for some DRAM contracts were adjusted downward twice in November. Upshot: Bigger price drops are expected in the first quarter of 2019 across memory products.

DRAM prices slide

In November, the average prices of low- and mid-range 4-GB/8-GB PC DRAM modules started to fall, while tags for high-range DRAMs remained flat, according to DRAMeXchange. The average contract price of 4-GB PC DRAM modules in November dropped by 3.2 percent month over month (MoM) from $31 in October to $30. The average contract price of 8-GB PC DRAM modules dropped by 1.6 percent MoM from $61 in October to $60.

The average selling prices (ASPs) of DRAM will drop by nearly 8 percent quarter over quarter (QoQ) in Q4 2018. However, PC DRAM, server DRAM, and specialty DRAM ASPs will fall by close to 10 percent. In general, the PC DRAM market is the most sensitive to supply and demand changes such as continued supply increases and excess inventories.

It’s a comparable situation in the server DRAM market with prices expected to take a steeper dive due to high inventories, seasonal headwinds and talk of a trade war between the U.S. and China. The shipment outlook is expected to be weaker in Q1 than the past three years, according to DRAMeXchange.

Prices for mobile DRAM also are predicted to decline -- but by only 5 percent because the market experienced a more moderate price hike during the previous undersupply cycle. However, the research firm added, bit demand for mobile DRAM relies on increases in the average content per smartphone, and there is a weak outlook for the global smartphone market.

“Looking ahead to Q1 2019, the supply will keep ramping up because of the increased share of products on the 1Y-nm process, raised yield rate of the technology, and continued production capacity expansion in Samsung’s Pyeongtaek fab in 4Q18,” according to Avril Wu, DRAMeXchange’s senior research director.

“On the demand front, the first quarter of the year is normally a low season for the DRAM market, and the demand momentum from smartphone shipments in 1Q19 tends to be weaker than in previous years,” according to Wu. “As a result, the price decline for mobile DRAM may go steeper then. As for the overall price trend in the DRAM market, it would be inevitable to see a sharper price drop in 1Q19 than in 4Q18.”

DRAM suppliers such as Micron expect to see supply and demand improvements in the second half of 2019.

“When we look at overall 2019 [DRAM] demand, given that these adjustments -- inventory adjustments by our customers, as well as the effect of CPU shortages -- they ultimately will be overcome and it will take an additional couple of quarters,” said Sanjay Mehrotra at a recent investor conference. What that means is supply could outstrip demand for calendar 2019, with demand improving in the second half of the year.

NAND flash oversupply

NAND prices dropped steeply in the fourth quarter of 2018 due to higher than expected bit output for NAND flash; steady yields of 64-layer 3D NAND production; low demand due to the trade war between the U.S. and China; the shortage of Intel CPUs; and lower than expected sales of new iPhones, according to DRAMeXchange analysts.

“On the NAND side in calendar year 2018, the industry has been somewhat oversupplied as a result of the 64-layer transition in the industry,” agreed Mehrotra. However, like the DRAM market, he expects to see demand improvements for NAND flash in the second half of 2019.

Although NAND flash manufacturers are slowing down their production capacity expansion, there are still oversupply concerns due to seasonal headwinds and high inventory levels. As a result, contract prices for NAND flash devices are forecast to drop by about 10 percent in Q1.

In addition, solid-state computing has been a strong growth driver for NAND flash, and DRAMeXchange forecasts client SSD contract prices to fall by nearly 10 percent in Q1 2019. At the same time, enterprise SSD contract prices also are forecast to drop by more than 10 percent due to seasonal headwinds.

“As the inventory adjustments as well as CPU shortages work through the systems that should restore the balance in the industry,” Mehrotra continued. “And it may be that in calendar year 2019 more output and more capacity has to be cut back in the industry to restore balance, both on the DRAM as well as on the NAND side.”