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Poor economy, chip oversupply pulls down DRAM market

Posted: 14 Oct 2011 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM market?

Due to constant replenishment for the holidays as well as account balancing at the end of Q3, the contract price of DDR3 4GB remained flat. This is according to DRAMeXchange, a research arm of TrendForce Corp.

On the other hand, DDR3 2Gb contract price decreased slightly by $0.25, which is now $10.50. While concluded transaction volume was low, at the start of the quarter, DRAM manufacturers were not pressured to ship, hence the price cut in exchange for shipment did not reoccur. From the market perspective, while PC OEMs have been replenishing their inventory since September, they are uncertain about Q4 shipments as the global economic outlook remains vague. As for the contract market, DDR3 2Gb chip price reached a new low at less than $1. This is a reflection of both lower than expected demand after China's National Holiday and the general pessimism toward DRAM market potential. TrendForce expects that as the market remains in a state of oversupply, conservative attitudes toward contract prices will continue to prevail.

As the global DRAM market was affected by disappointing economic growth and chip oversupply in 2011, chip price has been suffering since the beginning of the year. After Japan's March 11 earthquake set off rumors of supply chain disruption, prices surged to a year's high of $36.5. However, with the gradual recovery of the industry, the European debt crisis, the rising U.S. unemployment rate and overall shrinking of consumer markets, DDR3 4GB price decreased dramatically in May. Current prices were at $19.5 representing a nearly 47 percent decrease.

On average, memory accounts for six to seven percent of PC unit cost. The DRAM price is merely 3.8 percent of total PC cost, a proportion higher only than the low of 3.6 percent reached during the global financial crisis in 2008. Furthermore, DRAM manufacturers are pushing for DDR3 4GB to become the mainstream, as 4GB price is nearly 10 percent less than that of two 2GB modules combined. Thus, some PC OEMs have quietly increased the memory capacity of some of their models to 4GB in anticipation of holiday season demand.

Looking toward 2012, total content per box may increase to an average of 4.2GB, mainly due to the rise of ultrabooks and the introduction of Windows 8. The 4GB module may become the mainstream specification for ultrabooks next year, which will benefit the overall memory market as ultrabooks are expected to have 10 percent share next year. As for Windows 8, although its impact on content per box will be limited, it may stimulate a wave of upgrades. Microsoft's next-generation OS and the highly discussed ultrabook will be mutually beneficial.

TrendForce expects global NB content per box to gradually increase from 3.5GB in Q3 to 3.7GB in Q4, representing three percent growth. DDR3 4GB shipment volume is expected to surpass that of DDR3 2GB. As a large portion of DRAM makers mass produce 4GB chips via 30nm process technology in Q4, cost may be reduced by 20 to 25 percent, undoubtedly benefitting struggling manufacturers.

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