DRAM pricing collapse continued in December

4 Jan 2011

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DRAM prices kept falling in December 2010, plunging to their lowest part of the year. DRAM content per PC, which grew by 24pc in 2010, is expected to expand by more than 33pc in 2011, according to iSuppli.

As of 10 December 10, the contract price for a 2 gigabyte (GB) Double Data Rate 3 (DDR3) DRAM module stood at US$21 – down more than 50pc from US$44.40 just six months ago in June.

iSuppli says the dive in pricing is not restricted to DDR3 alone, as prices also have plummeted in the previous-generation DDR2 devices—declining to US$21.50 in December, compared to US$38.80 in June.

Soft PC demand

“DRAM prices in general have been affected by soft PC demand –especially during the first half of 2010 – as well as by greater supply of commodity memory following a solid increase in bit shipments during the second half,”said Mike Howard, principal analyst for DRAM and memory at iSuppli.

“That lethal combination of falling demand and growing supply has coalesced to place a great deal of pressure on DRAM ASPs.”

The decline in prices means that it has become considerably less expensive for PC original equipment manufacturers (OEM) to load machines with more DRAM, according to iSuppli.

As long as DRAM costs equate to less than 10pc of the ASP for PCs, manufacturers will continue to increase the memory content in their computers.

Price freefall

Howard said that DRAM pricing appears to be reaching critical levels, and he anticipates that nothing is likely to stop prices from continuing their slide during the next six months.

As DDR 3 reaches US$1 per gigabyte, DRAM manufacturers operating at the 60-nanometer (nm) process node will start to face the painful economics of costs exceeding prices, iSuppli believes.

When prices dropped below $1 per gigabyte in 2008, for instance, manufacturers with lagging process technology were forced to throttle down production.

“The dynamic that bears watching in the coming months will be how far DRAM companies can stay ahead of costs in order to maintain normal operations,” Howard observed.

“With leading DRAM processing already at the 3x-nm node, working in the older, less efficient 6x-nm and 5x-nm nodes will not be as cost effective during the coming months, and higher costs and shrinking margins will be incurred as a result.”

iSuppli anticipates that DRAM prices will continue their descent for at least the first half of 2011, with 2GB DDR3 modules dipping to less than US$15 by the end of the second quarter.

After that, the balance between supply and demand is expected to be more favorable at the end of the second half next year, which then could temporarily slow down or halt the drop in prices.

To learn more check out the Dram Pricing Continues to Collapse report.

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Carmel was a long-time reporter with Siliconrepublic.com

editorial@siliconrepublic.com