Oversupply and weak demand may result in steep DRAM price decline

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DRAM products are anticipated to decline by 5% QoQ, higher than the previous forecast of 1-3 percent, says DRAMeXchang, the DRAM and NAND flash market research firm.

The weak quotations are mainly due to increasing bit supply yet fairly limited growth in demand, despite the coming of holiday sales season, according to DRAMeXchange.

“DRAM products have begun to see a weak price trend since Q3 2018 after the price growth of nine consecutive quarters”, says Avril Wu, senior research director of DRAMeXchange. Particularly, PC DRAM and server DRAM showed only a 1-2 percent price hike QoQ in the third quarter, while mobile DRAM applications witnessed a flat price trend despite the busy season.

Graphics DRAM has also started to experience a price drop during the same period. On the other hand, the spot prices have been sliding since the beginning of this year and then dropped to a level lower than contract prices at the end of June, says DRAMeXchange. Currently, the spot prices are 10 percent lower than contract prices, which is an early indicator of the possible DRAM price decline in general.

In the server DRAM market, orders from data centre customers in North America and the transition to the new server processor platform have driven up the demand. Amid the tight supply of DRAM in the first half of this year, the end-clients tended to secure the supply by double booking.

By Q3, the undersupply has been eased with significantly improved order fulfilment rates, as the DRAM suppliers continue to increase the proportion of server DRAM applications in their product mixes.

Looking ahead to Q4, DRAMeXchange expects the quotations to decline by 5% percent QoQ, higher than the previous forecast of 2 percent due to the server demand being uncertain and spot prices of DRAM products continuing to fall in the channel market.

The PC DRAM market also expects an oversupply and a price drop up to 5 percent, says DRAMeXchange. The price decline is larger than the previous forecast, for the shortage of Intel CPUs may lead to lower demand for notebooks and PC DRAM in a row.

In terms of specialty DRAM, DRAMeXchange notes that the demand has already gone weak, together with price declines since September, because the U.S-China trade war has brought some uncertainties to the market.

For 4Q 2018, there is a higher chance for the contract prices of specialty DRAM to decrease, even steeper than PC DRAM and server DRAM.Mobile DRAM products also expect a weak price trend in the fourth quarter although the shipments of new iPhones are expected to boost the demand.

However, the market tends to be conservative about the smartphone sales due to new iPhones’ high price tag. Therefore, DRAMeXchange expects high possibilities for the oversupply of DRAM. Specifically, in Q4, the prices of discrete solutions may decline by around 3 percent QoQ, while eMCP may see up to 8 percent QoQ price decline due to the continuous price drop of NAND Flash.