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When SK Hynix’s plant in Wuxi, China, got damaged by fire last September and went offline, the world’s supply of dynamic random access memory (DRAM) contracted by a significant percentage and the prices skyrocketed. As shipments from Wuxi plant recover, computer memory prices also get lower. Moreover, given low demand for DRAM in Q1, prices may further drop going forward.

Average contract price of a 4GB DDR3 SO-DIMM in the first half of January was $33, whereas the highest price dropped from $35 to $34, according to DRAMeXchange, a research division of TrendForce. The contract price of 4Gb DDR3 memory chip rated to work at 1333MHz/1600MHz dropped to $3.81. It is noteworthy that spot price of a 4Gb memory chip at present is considerably higher – around $4.2.

Avril Wu, TrendForce’s assistant vice president, projects that the DRAM contract prices will first converge with the market spot prices by the end of the first quarter, and then begin to fall during the second quarter of 2014.

As SK Hynix is ramping up shipments of DRAMs from its Wuxi plant, other leading memory makers, such as Micron Technology and Samsung Electronics, can no longer charge premium prices for their production. SK Hynix is reportedly planning to adjust its prices upwards following its full recovery from the fire accident, but the demand structure may not allow the company to do so.

After the Chinese New Year, which is celebrated on the 31st of January this year, shipments of DRAM for notebooks are expected to drop 30% month-on-month, which will cause contract and spot prices on memory to drop further. TrendForce believes that the contract prices will return to pre-fire levels during Q1 2014, which means that a 4GB DDR3 module will cost between $27 and $28.

The situation with DRAM pricing in Q2 is less clear. On the one hand, demand for PCs recovers in the second quarter causing DRAM prices to increase. On the other hand, if the recovery is not significant, then memory manufacturers start to fight for customers and prices either remain on Q1’s levels or even drop. Still, DRAM makers can limit output to keep prices high, like they did in the past.

Tags: DRAM, Business, DDR2, DDR3, DRAMeXchange, Samsung, SK Hynix, Micron, Elpida, Powerchip Semiconductor, Inotera, Nanya

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