TrendForce: Q3 DRAM Contract Prices to Show 5-10% Growth with Decline in PC DRAM Supplies

PC DRAM supplies for the second half of the year have begun to tighten due to the major DRAM suppliers' continuous transition from PC DRAM to Mobile DRAM, the relatively low 25nm yield rates experienced by some of the DRAM manufacturers, and the delays with the 20nm process migrations, according to DRAMeXchange, the memory and storage research division of TrendForce.

With their inventories remaining at relatively low levels, the PC OEMs have begun to rely on both the original DRAM suppliers and memory module manufacturers for their chip supplies. The PC OEMs purchase strategy adjustments are among the major industry developments that will potentially boost the DRAM contract prices in the third quarter. At the moment, the 4GB spot prices are still quoted at approximately US$36, which is nearly 20% higher than the average contract price of $US30.5 spotted in May. Given the continuously shrinking gap between the DRAM industry’s contract and spot prices, it is projected that the former will rise by as much as 5-10% in the third quarter.

The continuously rising prices of PC DRAM in the recent periods is largely attributable to the suppliers' decision to lower its output. With the focus of the DRAM market now shifting towards the supply side, the manufacturer’s production strategies have become a more critical factor in influencing the industry's price movements. Samsung's strategies at the moment are focused on increasing its hold on the different DRAM product categories as well as furthering its market share in the industry. Even though the company's Galaxy S5 did not sell as well as expected, the fact that the Galaxy Note 4 is nearing a release in the second half of the year is indication that the company will continue to maintain its Mobile DRAM wafer productions at a steady level. With the demands for the company's server DRAM and graphic DRAM product lines turning out to be relatively decent and Samsung apparently insistent on sticking with its latest product mix strategy, it does not appear the company's PC DRAM product line will be expanded any further in the coming periods.

As for the other DRAM manufacturers, SK Hynix is currently unlikely to increase its supplies in the short term given the difficulties it experienced in raising its production yield rate following last year’s fire accident and the company's plans to leap towards 25nm technology only during the second half of the year. The company's PC DRAM production will remain tight as it continues to raise its mobile DRAM output throughout the course of 2014.

Due to the production related adjustments implemented at the New Micron Group's various manufacturing facilities, including its Singapore Tech plant's full transition from DRAM to NAND Flash, the Hiroshima plant's increased focus on Mobile DRAM, and the increased server DRAM production from Inotera and Rexchip, the the new Micron group's PC DRAM output proportion has yet to show any noticeable signs of growth this year.

While PC DRAM remains the most profitable product category in the DRAM industry, under strategic considerations, various DRAM manufacturers are deciding against expanding their PC DRAM production. Based on their prediction of future demand, some have opted instead to increase their focus on producing Mobile DRAM and Server DRAM. With PC DRAM's output continuing to be regulated, both the product's price and profit margins are expected to grow considerably in the future. For the entire year, the DRAM market will continue to show respectable growth, with industry value anticipated to reach another record high.