The stay-at-home economy remains robust due to the ongoing COVID-19 pandemic, so the sales of gaming products such as game consoles and the demand for related components are being kept at a decent level, according to TrendForce’s latest investigations. However, the values of cryptocurrencies have plummeted in the past two months because of active interventions from many governments, with the graphics DRAM market entering into a bearish turn in 3Q21 as a result. While graphics DRAM prices in the spot market will likely show the most severe fluctuations, contract prices of graphics DRAM are expected to increase by 10-15% QoQ in 3Q21 since DRAM suppliers still prioritize the production of server DRAM over other product categories, and the vast majority of graphics DRAM supply is still cornered by major purchasers.

It should be pointed out that, given the highly volatile nature of the graphics DRAM market, it is relatively normal for graphics DRAM prices to reverse course or undergo a more drastic fluctuation compared with other mainstream DRAM products. As such, should the cryptocurrency market remain bearish, and manufacturers of smartphones or PCs reduce their upcoming production volumes in light of the ongoing pandemic and component supply issues, graphics DRAM prices are unlikely to experience further increase in 4Q21. Instead, TrendForce expects prices in 4Q21 to largely hold flat compared to the third quarter.

Sudden drop in ETH prices led to plummeting GDDR5 and GDDR6 spot prices

Recent observations on the spot trading of graphics DRAM products indicate that the changes in this market closely correlate to the changes in the value of ether (ETH) because graphics cards are the crucial tool for processing the mining algorithm of this cryptocurrency. ETH prices fell by more than 50% within a two-month span as a result of the latest measures enacted by regulatory agencies around the world to suppress the speculation of cryptocurrencies. Accordingly, cryptocurrency miners’ and investors’ interest in ETH has also diminished significantly. The plunging demand from cryptocurrency miners also means that a substantial number of graphics cards are being pushed into the second-hand market. TrendForce’s investigation shows that spot prices of graphics cards have fallen by about 20-60% over the past month or more. The differences in the magnitude of decline depends on brand and technology generation. Furthermore, the across-the-board decline in spot prices of graphics cards has also severely constrained the spot demand for graphics DRAM.

According to TrendForce’s understanding, even though spot prices are still higher than contract prices for GDDR6 chips, the difference is rapidly shrinking. This, in turn, will have an adverse effect on the general price trend of GDDR6 chips in the future. The trading is even more subdued for GDDR5 chips that are used in the earlier generations of graphics cards. Spot prices are now actually about 20% lower than contract prices for GDDR5 chips. The difference here indicates that there is a glut of older graphics cards, and the GDDR5 chips that are embedded in them are no longer in high demand.

Contract prices of graphics DRAM are expected to increase by nearly 15% for 3Q21 as graphics DRAM suppliers’ fulfillment rate remains relatively low

Regarding the contract market for graphics DRAM, the sell-side has considerable leverage in price negotiations as these suppliers prioritize the production of server DRAM ahead of other product categories. In the current ecosystem of discrete graphics cards, graphics DRAM buyers such as Nvidia are still opting for a business model based on bundle sales (that is, graphics card manufacturers that purchase Nvidia GPUs must also purchase graphics DRAM from Nvidia). Given that Nvidia and AMD have cornered the vast majority of graphics DRAM supply, notebook OEMs and small- and medium-sized manufacturers of computer components (such as motherboards) will find it difficult to procure sufficient graphics DRAM, while DRAM suppliers’ fulfillment rate for graphics DRAM chips remains relatively low. These aforementioned factors are responsible for not only the nearly 15% QoQ hike in the overall contract prices of graphics DRAM for 3Q21 (which is slightly higher than the corresponding price hikes in mainstream PC and server DRAM products for 3Q21), but also why spot prices of GDDR6 chips are about 10-15% higher than contract prices.

On the whole, prices in the graphics DRAM spot market, which is an extremely responsive market, have already begun to reflect the weakening demand from the end-product segment, particularly for graphics cards used in cryptocurrency mining. As the supply of second-hand graphics card increases, some graphics card manufacturers may thus kick off promotional price cuts to boost sales. In addition, buyers in the spot market may also begin anticipating even lower prices, and this anticipation will likely either lead to a massive decline in their graphics card demand or result in these buyers adopting a speculative attitude regarding graphics DRAM. TrendForce therefore believes that the gap between spot prices and contract prices of GDDR6 chips will begin to narrow in 3Q21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

TrendForce’s latest investigations find considerable discrepancy between prices for graphics DRAM products in the contract market and in the spot market. Quotes for graphics DRAM products continue to rise in the contract market as the severe undersupply situation persists. Furthermore, the supply fulfillment rates for orders from some medium- and small-size clients have been hovering around 30%. This undersupply situation is expected to persist through 3Q21, during which graphics DRAM contract prices are expected to rise by 8-13% QoQ. Regarding the spot market, on the other hand, the value of ETH experienced continued uptrend from the start of 2021 until May, thereby driving up the demand for graphics cards, regardless of them belonging to the newer or older series. At the height of the graphics card boom, spot prices of graphics DRAM products were up to 200% higher than contract prices. Demand from miners for graphics cards are expected to be relatively muted before cryptocurrencies return to their previous bullish trends, and the gap between the spot and contract prices of graphics DRAM products will likely narrow in 3Q21 as a result.

TrendForce expects four key factors to continue driving up graphics DRAM prices in the contract market. First of all, demand in the PC market remains high, particularly for gaming products. Secondly, DRAM suppliers’ production capacities allocated to most clients are constrained by the fact that Nvidia bundles its GPUs with graphics DRAM, meaning DRAM suppliers have prioritized capacity allocation to Nvidia as opposed to smaller clients. Thirdly, both the Xbox Series X and PS5 are equipped with GDDR6 16Gb chips, which is different from GDDR6 8Gb chips. As the two chips are non-interchangeable, once DRAM suppliers commit their production capacities for one, they can no longer produce the other using the same batch of wafers. Finally, since there has been a resurgence of server DRAM orders, DRAM suppliers are still prioritizing the production of these products as they are a mainstream market product. As various products each compete over limited DRAM production capacities, graphics DRAM contract prices are expected to undergo an increase going forward. In particular, medium- and small-size OEMs/ODMs may likely face double-digit percentages increases.

Sharp drop in values of cryptocurrencies has caused spot prices of GDDR5 and GDDR6 products to fall

Regarding the spot market, although spot prices for GDDR6 products has been undergoing a slight drop since May, they are still nearly 100% higher than the average contract prices. Conversely, there is almost no difference between spot and contract prices for GDDR5 products. Looking at the reasons behind the slide in spot prices of graphics DRAM products, a sharp drop in the values of cryptocurrencies is the most significant contributor apart from the excessively large difference between spot and contract prices. The recent bearish movement of cryptocurrencies has resulted in a sharp drop in incentives for miners. In turn, this has led to a corresponding drop for older graphics (such as the Nvidia GTX 1660, which features GDDR5 DRAM), which have no other sources of demand. GDDR5 prices hence entered a significant decline. With regards to newer graphics cards, however, there is still a baseline level of demand for them thanks to purchases by gamers. Furthermore, these newer graphics cards, much like the new generation of game consoles, feature GDDR6 DRAM. Therefore, due to the current demand for GDDR6 products, their price drop in the spot market is lower compared to GDDR5 products.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com