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Oversupply Means DRAM Tags Should Continue to Drop

The buyer’s market for DRAM will continue into 2012 because of sluggish demand and oversupply, according to researcher DRAMeXchange in Taiwan.

DRAM prices have declined most of the year except for immediately after the March 11 earthquake in Japan. For instance, the average price for a 4 gigabyte DRAM module dropped 47 percent from $36.50 in May to $18.50 in November, DRAMeXchange reported.

The good news for buyers is that DRAM contract prices should continue to fall because of overcapacity and sluggish demand.

DRAM demand in 2011 has been weak because of economic instability in Europe and the U.S. In addition growth of media tablets has negatively impacted PC sales. PC shipment growth will increase only 6.2 percent in 2012 over 2011, according to DRAMeXchange.

The flood in Thailand could also have an impact on DRAM market in the first quarter of 2012. Many drive manufacturers halted production when their facilities in Thailand flooded.

If the HDD supply chain has not recovered from the Thailand flood disaster by the first quarter, PC shipments – and DRAM demand – may decrease even further.

The researcher predicted that DRAM bit growth supply will increase only 28 percent in 2012. Usually, the DRAM bit growth is in the 40-50 percent range.

Weak prices will cause some DRAM makers will reallocate capacity to non-commodity DRAM products, and there may be more capacity cuts. Without additional PC DRAM capacity cuts, oversupply will continue. Current prices for many DRAMs have fallen below DRAM makers’ cash cost. Without production cuts DRAM prices won’t recover in the first half of 2012, according to DRAMeXchange.