Contract prices have started to drop in PC DRAM market, Says TrendForce

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Contract prices of PC DRAM products have started to turn downward sharply as major suppliers have completed most contract negotiations, reports DRAMeXchange, a division of TrendForce.

The average price of 4GB PC DRAM modules for the fourth quarter of 2018 (Q418) contracts has dropped by 10.14% quarter on quarter (QoQ) from $34.5 in 3Q18 to the current $31. As for the average contract price of 8GB PC DRAM modules, it has dropped by 10.29% QoQ from $68 in 3Q18 to the current $61.

Since the DRAM market has just entered oversupply, DRAMeXchange does not discount the possibility of further price declines in November and December. Also, the price decline of 8GB solutions will continue to surpass that of 4GB solutions because DRAM suppliers are now eager to sell off their inventory.

“As the indicator of the price trend in the contract market, spot prices have kept falling since the early 2018 and continued their downtrend from September”, says Avril Wu, senior research director of DRAMeXchange. The latest update reports that the average spot price of 1G*8 chips has dropped to $6.946, showing a difference of 5% with the average contract price of $7.31. While the oversupply situation and the falling spot prices pull contract prices of PC DRAM modules downward, the market penetration of 8GB modules is starting to increase very rapidly because suppliers have aggressively expanded shipments of the higher-density products.

DRAMeXchange believes that 8GB modules will surpass 4GB counterparts in shipment volume much sooner than originally anticipated and become the market mainstream. It should also be noted that DRAMeXchange will be using prices of 8GB modules as the base for determining the contract price trend in the PC DRAM market starting in 2019.

Seasonal headwinds expected to aggravate price decline in the PC DRAM market during 1Q19

PC-OEMs have not been able to step up their product shipments in the 2nd half of 2018 due to the shortage of Intel CPUs. Going forward, the pressure of rising component costs will only mount as the shipment season transitions from the peak period to the slow period. Since DRAM prices had risen for nine consecutive quarters, they are expected to take a plunge as they move past the inflection point. The sliding average selling price (ASP) in the PC DRAM market will also add to the downward pressure on prices of PC DRAM modules, leading to large and sudden drops.

Looking ahead to 1Q19, seasonal headwinds will affect shipments of end products not only in the PC market but also in the server and smartphone markets. Furthermore, the quarter will be the period for the channel market and OEMs to eliminate excess inventory. Thus, negotiating contracts will be very challenging for the DRAM suppliers.

The ASP in the whole DRAM market is forecast to fall by as much as around 20% year on year in 2019, according to DRAMeXchange’s latest analysis. After reaching peak profit in 3Q18, DRAM suppliers are now optimising their costs so that they will have a soft landing in 2019 as prices are marked down every quarter.