Contract Prices Likely to Continue to Fall for Months
Market research firm DRAMeXchange reported on Aug. 27 that the PC DRAM (DDR4 8Gb) spot price rose 0.24 percent to US$2.53 on Aug. 25. The price rebounded in 143 days after it reached this year’s high, US$3.63, in early April.
Until Aug. 24, the DRAM spot price fell more than 30 percent in four months. The rebound on Aug. 25 was because a solid global demand for PCs somewhat offset excessive concerns over the falling price of the item.
The movement of the spot price is very meaningful in that it is a leading indicator of the contract price, which accounts for most of the sales in the industry. More than 90 percent of PC DRAMs are traded based on the contract price in relation to major manufacturers such as Lenovo. For years, the contract price and the spot price have shown similar movements with a time lag of several months.
Given the time lag, the contract price is likely to continue to fall for months. Last month, the contract price (US$3.13) was much different from the spot price (US$2.53), which means the contract price can fall for months. Last month, the contract price fell for the first time in nine months. Likewise, the server DRAM (DDR4 32GB) and NAND flash (128Gb MLC) prices fell 6.4 percent and 6.2 percent last month, respectively. Under the circumstances, the contract price that is scheduled to be announced late this month is predicted to fall from a month earlier.
Major memory chip suppliers such as Samsung Electronics are also accepting a decline in price for the rest of this year as a fait accompli. For example, Micron Technology, the third-largest DRAM supplier in the world, recently lowered its sales and profit estimates for September to November.
Still, they are anticipating a rebound late this year. “The supply and demand cycle of the industry indicates that the global semiconductor sector is capable of rebounding late this year although favorable factors such as an increase in the supply of self-driving vehicles and the release of high-performance game consoles are mixed with adverse ones such as COVID-19, smartphone market degrowth and delayed 5G network building,” one of them explained.
The game consoles include the Sony PlayStation 5 and the Microsoft Xbox Series X, which will be released late this year. They use GDDR DRAMs optimized for graphic and video processing, their prices are higher than those of mobile LPDDR for lower power consumption and, as such, they can help memory chip suppliers improve their profitability.
In addition, the consoles come with NAND flash-based high-capacity SSDs. Specifically, PlayStation 5 and Xbox Series X come with 825 GB and 1 TB SSDs, respectively. This means the consoles’ data storage capacity is twice to four times that of high-end smartphones. With almost all NAND flash suppliers in the red due to over-competition, their losses can be reduced if the ninth-generation consoles gain popularity.