Contract price decline for 4GB module worsens, says report

According to the latest data from DRAMeXchange, 2HSep contract price of 4GB modules remain on a downtrend amid weakening notebook shipments and the dearth in the capacity of Windows 8 to spur PC shipments. The research arm of TrendForce added that as 4GB modules have replaced 2GB modules as the market mainstream, 4GB price drops have become more apparent with average 4GB contract price falling by 5.8 per cent.

Average transaction price fell from $17.25 to $16.25, with a low of $16, close to the lowest price reached 2H11. Average 2GB module price, on the other hand, has dropped to $9.25, a 5.13 per cent decrease compared to the first half of the month. From the market perspective, DRAM average selling price has been plummeting at an increasing rate since July, reflecting not only weaker-than-expected seasonal demand, but also the fact that supply-side adjustments were not as effective as hoped. Using 4GB module price as the basis of calculation, 2Gb chip price has plunged to a low of $0.84, arriving at spot price levels.

Looking at the spot market, as purchasing is weak, module makers are less eager to restock inventory. Both contract and spot prices reflect price negotiation difficulties, and transaction volume has been much lower than last quarter, clear indication that both module makers and PC OEMs have high stock levels. Thus, buying momentum is not likely to pick up in the short term. In the absence of large-scale production cuts, TrendForce expects contract price will remain on a downtrend.

As the PC market has matured in recent years, in addition to the fact that the global economy is expected to worsen in 2H12, TrendForce forecasts PC shipments will see -3.9 per cent growth for 2012. Furthermore, as consumers' limited budgets and changing preferences steer them towards other mobile devices, smartphones and tablets are experiencing high growth while the PC market suffers. It is clear that PC demand is not as it was. The category is no longer the market mainstream, as shown by the fact that the 2012 PC DRAM shipment ratio has fallen below 50 per cent for the first time. On side, although makers are beginning to favour non-commodity DRAM production, PC DRAM supply is still in excess, which indicates restoring the supply-demand balance can no longer be achieved via production adjustments.

A portion of commodity DRAM capacity must be permanently reduced if industry supply levels are to be lowered. According to TrendForce data, 2HSep 4GB module price is approaching last year's low, and is already below every DRAM maker's total cost (based on mainstream 30nm process). Losses from commodity DRAM are not decreasing, and price is expected to continue falling in the short term unless large-scale capacity cuts are initiated.

Looking ahead, TrendForce expects the PC DRAM ratio of total DRAM supply will continue to decrease, from 45 per cent in 2012 to 35 per cent in 2013. In addition to limited demand from PC shipment growth, although ultrabook shipments continue to grow, due to physical limitations (the ultrabook's thickness standards) memory content per unit is unlikely to increase significantly. As there is nothing to stimulate growth, suppliers are replacing 2Gb chips with 4Gb chips to lower costs, and technology migration is slowing as manufacturers try to lower capex. As a result, PC DRAM will see negative bit growth for the first time in 2013, and it is likely more capacity will be withdrawn from the market, which will help balance supply and demand. On the other hand, mobile DRAM is expected to continue experiencing high growth next year, with a 48 per cent increase projected. Taking server DRAM shipments into account as well, in 2013 cloud computing memory shipments are expected to exceed 46 per cent, officially becoming a mainstream application. Undeniably, the DRAM industry layout will see a transformation as demand changes.