Although Q3 is the peak for manufacturers of dynamic random access memory (DRAM) with maximum demand and maximum prices, the price of memory in July only decreased compared to June due to uncertainties associated with the growth of the PC market. July’s 2GB module contract price decreased 15.94% from last month, according to DRAMeXchange, a research division of TrendForce.
DRAM Price Drops 15.94% Sequentially in July
PC OEMs are still in a period of inventory adjustment for second half of July and transaction volume has remained low since June, according to DRAMeXchange. Overall price has decreased 15.94% in the month of July. DRAM contract price for the second half of July continues to follow the downward trend of first half of July. Contract price on DDR3 2GB and 4GB memory modules is $14.5 ($0.75 per 1Gb) and $28, representing a decline of 9.38% and 9.68%, respectively. As spot market price has also fallen, module houses started to undersell to reduce their inventory levels and prevent losses. DDR3 2Gb average spot price was $1.62 in June, in July it dropped 16% to $1.3608.
With such price quotes, the spot market is crowding out contract transactions. Thus, contract price negotiations are becoming increasingly difficult, and it is clear that the downward trend of DRAM price has been firmly established.
DRAM Manufacturers Propose Special Deals to Retain Market Share
Since this wave of falling DRAM prices comes only two years after the previous global financial crisis, DRAM manufacturers were truly caught off guard by the rate of drop. Cost-wise, even the most advanced 30nm manufacturing processes are on the verge of breaking even, let alone the mainstream 40nm processes. On the supply side, the total number of wafer starts has decreased 2% compared to last year. While manufacturers have been conservative in terms of wafer starts, the increase in production volume brought by process migration has caused this year’s DRAM prices to decline.
As was the case in the previous financial tsunami, the current DRAM market has been negatively affected by overall weak economies. However, an even more weakening factor is that regardless of how low DRAM prices have dropped, there has been limited stimulation to content per box. In terms of PC production cost, 2GB memory module price for July only represents about 5% of total cost, which should have spurred PC-OEMs to increase content per box. However, as the Windows 7 operating system does not require over 4GB of memory for a mainstream consumer, the acceptance of 4GB and larger memory modules has been mediocre overall.
As for the recent contract price trend, in order to increase market share amid limited transactions on the client end, DRAM manufacturers are engaging in special deals. Thus, the proportion of total transaction volume represented by special deals has shown signs of an increasing trend. Aside from concluded transaction prices approaching the published low price, a considerable proportion of transactions have been conducted at new under-the-table lows.
As DRAM manufacturers are eager to clean out their current stock, special deal stipulations often include requirements for PC-OEMs to purchase inventory within a certain amount of time or bundle chip purchase with a certain proportion of 2GB or 4GB modules. As DRAM manufacturers continue to hang by a thread, they can only hope that PC-OEMs will begin inventory restocking soon and let DRAM prices return to a reasonable benchmark.