Prices for Some Contracts Have Been Adjusted Downward Twice in 4Q18, Contract Prices of DRAM Products Would See Steeper Decline in 1Q19, Says TrendForce

Contract prices of DRAM products have started to slide since 4Q18, and a certain amount of DRAM contracts have now been negotiated as monthly deals, instead of quarterly ones, reports DRAMeXchange, a division of TrendForce. For some contracts, the prices have been adjusted downward twice in this November, which was very rare in the industry. The situation indicates that the OEMs now have a negative outlook on the market and the price falls are expected to enlarge in the first quarter of 2019.

In this November, the average prices of low and mid-range of 4GB/8GB PC DRAM modules have started to fall, while that of high-range ones remained flat. The average contract price of 4GB PC DRAM modules for November has dropped by 3.2% MoM from US$31 in October to the current US$30. As for the average contract price of 8GB PC DRAM modules, it has dropped by 1.6% MoM from US$61 in October to the current US$60.

DRAMeXchange estimates that the average selling prices of DRAM would drop by nearly 8% QoQ in 4Q18. Particularly, PC DRAM, server DRAM, and specialty DRAM ASPs would all show a sequential fall close to 10%, the highest among all the applications. In comparison, mobile DRAM would witness a relatively smaller price drop of 5% in ASP, because mobile DRAM products experienced a more moderated price hike during previous undersupply compared with other applications.

Looking ahead to 1Q19, the supply will keep ramping up because of the increased share of products on the 1Ynm process, raised yield rate of the technology, and continued production capacity expansion in Samsung’s Pyeongtaek fab in 4Q18. On the demand front, the first quarter of the year is normally a low season for the DRAM market, and the demand momentum from smartphone shipments in 1Q19 tends to be weaker than in previous years. As a result, the price decline for mobile DRAM may go steeper then. As for the overall price trend in the DRAM market, it would be inevitable to see a sharper price drop in 1Q19 than in 4Q18.   

DRAM market expects weakening outlook due to increased supply and sluggish demand

For the PC DRAM segment, DRAMeXchange expects the prices to decline by over 10% QoQ in 1Q19, because PC DRAM products are highly sensitive to the change in demand and supply situations. The continued supply increase, headwinds in the low season, and excess inventories would make the price drop steeper compared with this quarter. Similarly, server DRAM products would experience an even larger price drop. In addition to current high inventories held by server DRAM consumers and the seasonal headwinds, U.S-China trade disputes may also bring more uncertainties to the market. The shipment outlook for 1Q19 is expected to be weaker than the past three years, especially for mainstream 32GB modules, for which manufacturers have offered attractive quotations to drive the sales.

Mobile DRAM products also expect a weak price trend in 4Q18. As shipments of new iPhones have reached its peak, and inventories of Android phones in the channel markets remain high, the first quarter of next year will be the period for the channel market and OEMs to eliminate excess inventory. Thus, the demand for key components would be very limited. Moreover, we also expect a slowdown of 2.6% YoY in the global smartphone production volume next year. As the bit demand for mobile DRAM will merely rely on increases in average content per box of smartphones, the weak outlook of the global smartphone market would result in a continued price drop for mobile DRAM products.

In terms of the specialty DRAM segment, the first quarter of the year is also a traditional low season. The prices would continue to fall considering the greater impacts of U.S-China trade disputes. Particularly, DDR4 products may witness steeper price drop than DDR3 ones due to weak demand from PC and server products.