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Oversupply, Weak Demand Drives Down DRAM Tags

DRAM contract prices continue to fall because of oversupply, lackluster PC demand, and a relatively slow growth rate in memory content per PC.

Contract prices for 4 gigabyte (GB) DRAM modules have declined from about $21 in July to $17.25 in September, according to researcher TrendForce in Taiwan.

PC shipments, which had been expected to grow 4 to 5 percent in the second half of the year, are now expected to fall 2.5 percent, the researcher reported. At the same time, memory content per PC 2012 will average about 4.7 GB, an 18% increase over 2011. In the past, DRAM content per PC would routinely grow 40 percent or more per year.

Prices are likely to continue to fall because of sluggish PC demand and excess DRAM supply. While the 2012 oversupply situation is better than during 2011, standard memory chip supply exceeds demand by approximately 10 percent.

Supply could be reduced when Micron acquires Elpida and the production capabilities of the two companies are combined. However, a Japanese court recently delayed ruling on Micron's bid to acquire Elpida.

If Micron and Elpida were to combine their production capacities during the first quarter, the 2013 DRAM market supply will still likely exceed demand by about 7 percent.

Windows 8, Microsoft's new operating system, is not expected to immediately stimulate as big of a hardware transition as in the past.

According to TrendForce, if the three leading DRAM manufacturers – Samsung, Micron, and SK Hynix – do not reduce production, the DRAM oversupply will likely extend into 2013.