In part the price increase is due to a perfect storm – changes in technology from DDR3 to LPDDR4, smaller die sizes, increased vertical V-NAND stacking (density and capacity from 16 to 32 to 64 layers), and far stronger than expected demand for memory from a bouyant tablet/hybrid PC segment.
Trendforce’s DRAMeXchange reports that in Q3, the DRAM industry expanded the share of mobile DRAM in its overall output to over 40%, which in turn squeezed the share of PC DRAM in the overall output to under 20%. At the same time, demand from notebook and smartphone clients was at its peak. 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.
“The price hike in the spot market for DRAM chips has been more significant,” said Avril Wu, research director of DRAMeXchange. “In September, the average spot prices of 4Gb DDR3 and DDR4 chips rose 19% and 15% respectively compared with the prior month to US$2.1 and US$2, indicating that the market demand continues to outpace supply.”
Wu added that PC-OEMs were already finalising their fourth-quarter DRAM contracts in September due to the tightening of supply, “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.”
At the same time, the NAND Flash market is experiencing shortages. In the fourth quarter, the average selling price of eMCP (lower cost storage used in many smartphones and tablets) will increase by 10-15% versus the prior quarter.
The other interesting factor is that OEM (original equipment manufacturers) have been willing to pay more simply to guarantee supply – it’s a seller’s market.
Supply and demand make the economy go around. There has been an abundance of DRAM and prices remained low. In fact, according to the Memory Guy, prices peaked in 2014/15 and have been rapidly declining since – until now.
It seems that Chinese memory makers have finally begun to get organised under one of the many long-term Chinese government’s ”silicon” plans and there has been better organisation and less competition from competing memory makers. Digitimes has reported that the spot price in September of 4GB DDR4 chips have risen to US$2.02 each – a seven-month high.
This could add $20-$50 to the price of a smartphone or tablet in the coming months.