“Wait until next year,” is a slogan often used by baseball teams that failed to have winning seasons. However, it is also a phrase that that could offer some solace to memory chip buyers who have seen steep price increases for DRAM this year.
Average prices for DRAM are rising, and will finish 2018 increasing 38% after rising 81% in 2017, according to researcher IC Insights. The good news for DRAM buyers is that capacity is being added and will ramp up later this year and in 2019—resulting in more supply and falling prices.
IC Insights pointed out that the DRAM industry’s capital expenditure increased by 81% last year and increased by 40% this year. Under this situation, it is expected that the supply will be higher than the demand in the future, and the supply and demand is an important indicator of the price trend.
The added capacity coupled with little growth in unit demand will result in “DRAM transitioning very quickly from shortage to oversupply,” said Jim Handy, general director and semiconductor analyst at research firm Objective-Analysis based in Los Gatos, Calif. DRAM prices will fall as a result, although there is a difference of opinion on how much.
“Prices are going to collapse by 68%,” said Handy. The average price per gigabyte for DRAM will fall from $7.07 in 2018 to $2.57, he said.
It is worth noting that although the growth rate of capital expenditure is high, a considerable part of the capital expenditure is consumed in the upgrade of the 20-nanometer process, which means that the same capital investment will generates less production capacity than before. The expected overcapacity risk this time may not be as serious as it used to be.
However, other researchers forecast more modest price declines. The average price of DRAM will fall 6% next year and 14% in 2020, according to IC Insights.
In addition, Innotron Memory, JHICC and other two memory factories from China are expected to join the global supply this year, which will also bring an unknown variable to the memory market.
Not all new capacity will be due to DRAM manufacturers building new production lines or fabs. DRAM supply will also increase because of the transition occurring with NAND flash memory, said Handy. Memory IC manufacturers build both DRAM and NAND flash.
Memory chipmakers are transitioning from planar NAND to 3D NAND because 3D NAND has the potential to offer higher capacity in a smaller space. It will lower the cost per gigabyte, cut power consumption, improve reliability, and provide higher data write performance, according to memory IC suppliers.
Despite demand from server and cell phone manufacturers, the DRAM market should be oversupplied in 2019. The other good news for DRAM buyers is that there could be more competition in the DRAM industry in the next several years.
Several Chinese companies were expecting to begin trial production of DRAMs in the second half of this year, according to Taiwan-based memory industry researcher DRAMeXchange. However, buyers will have to wait until next year before production volumes of DRAMs are produced by Chinese manufacturers.
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