Suppliers and clients in the server DRAM market are still having difficulty in reaching agreements on prices for 3Q21 contracts even though the quarter is well underway, according to TrendForce’s latest investigations. Hence, server DRAM contract prices are much more varied than before. Regarding the price trend in July, contract quotes for the mainstream 32GB RDIMMs rose by 5-7% MoM.

However, the price hikes have led to a reduction in demand, and there are indications that server DRAM sales bits will register some decline for 3Q21. The release of server CPUs based on the new platforms is driving the procurement of higher-density 64GB RDIMMs, but this has not resulted in a significant corresponding increase in content per unit. The general trend for buyers is to replace two 32GB modules with one 64GB module, rather than a one-to-one replacement as DRAM suppliers previously expected. Contract prices of 64GB RDIMMs rose by 5-7% MoM for July, though prices were below this range for some transactions.

TrendForce’s analysis shows that server DRAM suppliers and buyers are finding it difficult to reach a consensus on prices because DRAM suppliers expect that the demand for server DRAM modules is going to surge in 3Q21 as the third quarter is the traditional peak season for the server market. As well, suppliers also anticipate that the adoption of new server processor platforms will increase the memory content in servers.

With a more optimistic demand outlook, suppliers have adjusted their product mixes to allocate more of their production capacity to server DRAM. Hence, the supply fulfillment rate has risen significantly in the server DRAM market in 3Q21. Server DRAM buyers, on the other hand, already have a high level of inventory. Clients in the data center segment were aggressively stockpiling during the first half of this year due to worries about the impact of the COVID-19 pandemic on the supply chain. They now need some time to consume their inventories and are reluctant to procure more DRAM modules.

Contract prices will be constrained to rise further in 4Q21 as demand side has turned conservative

Currently, enterprise server OEMs in North America have finished arranging their quarterly contracts, whereas numerous cloud service providers and Chinese enterprise server OEMs are still in the midst of negotiations. TrendForce believes that, in order to reach their targets for sales and shipments, server DRAM suppliers may be willing to cut more “special deals” for server DRAM products in August. Specifically, suppliers will push for lock-in contracts that offer adjustable prices for fixed quantities.

On the whole, the general behaviors of DRAM buyers with regards to procurement have changed noticeably form the first half of this year. As the demand related to servers, PCs, and other major applications slows down, the whole DRAM market will gradually shift to the state of oversupply. Since the DRAM market is an oligopoly, the major suppliers will still have significant leverage in price negotiations. Quotes for server DRAM products could therefore rise further by 5-10% QoQ in 3Q21. However, given that prices have yet to be finalized for a substantial portion of 3Q21 contracts, the transaction volume is also very limited. This, in turn, will inevitably create a lot of uncertainties with respect to the price trend in 4Q21.

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

Now that most negotiations over contract prices of PC DRAM for 3Q21 have concluded, DRAM suppliers’ low inventories and the arrival of the peak season for DRAM procurement have resulted in a 3-8% QoQ increase in PC DRAM contract prices for 3Q21, although this is a relatively muted growth compared to the 25% increase experienced in 2Q21, according to TrendForce’s latest investigations.

However, demand for PC DRAM in the spot market began to show signs of bearish movement in early July ahead of time, as DRAM suppliers continued to lower prices in order to adjust their DRAM inventories. Regarding the contract market, PC OEMs currently carry relatively high levels of DRAM inventory because they substantially stocked up on PC DRAM beforehand in anticipation of an upcoming shortage. Not only has PC OEMs’ high DRAM inventory put downward pressure on possible price hikes for PC DRAM, but the gradual lifting of COVID-related restrictions in Europe and the US will also likely lower the overall demand for notebook computers, thereby pulling down the overall demand for PC DRAM. TrendForce therefore forecasts a 0-5% QoQ decline in PC DRAM contract prices for 4Q21.

Regarding spot prices of DRAM modules, most major module suppliers have also started to lower prices in an attempt at inventory reduction, leading to a persistent downward trend for spot prices of PC DRAM modules throughout August. According to TrendForce’s findings, this decline in spot prices of mainstream PC DRAM modules, which began on May 20th, accumulated to 32% as of August 3. Furthermore, spot prices of PC DRAM modules have, for the first time in 2021, now fallen below contract prices for 3Q21 by almost as much as 20% and are unlikely to experience a price hike in the short run.

Since PC OEMs still keep a high inventory of PC DRAM, their upcoming procurement activities for PC DRAM will likely remain sluggish

An overview of the PC DRAM market throughout 2021 shows that, as the COVID-19 pandemic reached its peak in 2Q21, most purchasers aggressively stocked up on various components, including memory solutions, in order to avoid possible shortages, and these stock-up activities were particularly bullish in the PC market. As a result, PC DRAM prices underwent a massive 25% increase in April, and demand bits also saw a surge during the quarter.

Moving into 3Q21, buyers and sellers in the PC DRAM and server DRAM markets found it difficult to reach an agreement while negotiating over contract prices throughout the end of July. As such, the increase in PC DRAM prices for 3Q21, along with the increase in PC DRAM sales bits, is significantly weaker compared to 2Q21. In addition, TrendForce indicated at the end of June that most PC OEMs were carrying about 8 to 10 weeks’ worth of PC DRAM inventory, with some even surpassing 10 weeks. Their inventories have not undergone significant improvements as of early August. As these PC OEMs gradually take delivery of DRAM they procured for 3Q21, some of them now carry inventories exceeding 12 weeks’ supply. TrendForce therefore believes that the persistently growing inventories of PC OEMs will likely result in a further weakening of PC DRAM contract prices in 4Q21.

Looking ahead to 4Q21, TrendForce expects PC shipment, particularly Chromebook shipment, to remain in a downward trajectory following increased vaccinations in Europe and the US. The latest data show that branded Chromebook shipment peaked in 2Q21 and subsequently underwent monthly declines following this peak. Furthermore, the overall demand for notebook computers has started waning as the general public resumes its day to day activities, such as a return to offices and schools, in light of the gradual lifting of COVID-19 restrictions in Europe and the US. Hence, TrendForce believes that, despite the cyclical upturn of the notebook market in 4Q21, as well as the commercial segment’s replacement demand, ODMs will likely continue to cut back on notebook production on a quarterly basis, in turn decreasing the overall demand for PC DRAM.

Prices of both consumer DRAM and graphics DRAM are expected to enter into a downturn in 4Q21 owing to weak supply and demand

In sum, the sufficiency ratio of PC DRAM increased from -1.13% in 3Q21 to 0.28% in 4Q21. Hence, TrendForce expects contract prices of PC DRAM to take a downward turn in 4Q21, while prices of DDR4 consumer DRAM, which are highly correlated with PC DRAM prices, will likely undergo a similar decline. Likewise, contract prices of graphics DRAM are expected experience a looming decline as well, since the sudden cryptocurrency downturn resulted in a corresponding plummet in cryptocurrency mining demand and, by extension, spot prices of graphics DRAM, which is used in cryptocurrency mining equipment.

Regarding server DRAM, contract prices are expected to mostly hold flat, without noticeable hints of price hikes, in 4Q21. This trend can be attributed to the server industry’s migration to Intel’s new Ice Lake platform, which has been steadily rising in terms of penetration rate, as well as the fact that demand for servers has yet to weaken. However, MoM declines in server DRAM contract prices may potentially take place in November and December. Likewise, mobile DRAM prices are expected to remain relatively unchanged in 4Q21 compared to the previous quarter. The profitability and ASP/Gb of this product category are relatively lower compared to other DRAM products, such as PC DRAM and server DRAM, and it did not experience as much of an uptrend during the prior quarters. Hence, while PC DRAM prices are expected to decline in 4Q21, mobile DRAM prices will remain sustainable, without undergoing a similar decline.

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