RAM continues to become more expensive. What is happening on the electronics market
In the spring of 2023, we published the article “A blow, another blow: RAM production is not going through the best of times. Prices are falling, production is shrinking.” At that time, it was said that the RAM market is not going through the best times, so in the IV quarter of 2022, the sales of DRAM manufacturers fell by 32.5%. According to experts, such a strong fall has not occurred since the crisis for the industry in 2008.
Most market players then agreed that the production of RAM chips needed to be cut in order to keep prices down. But now, it seems, the situation is changing, and the cost of RAM will only increase. Moreover, this applies to almost all generations of RAM — the cost is increasing. Details – under the cat.
What’s going on?
According to experts, RAM prices will increase by an average of 15% in the first quarter of 2024, according to representatives of both vendors and analytical agencies, including TrendForce. If we talk about the mobile segment, not laptops or PCs, but the prices will increase even more – analysts predict growth of about 20% year on year.
The reason is exactly what was said earlier, in the artificial reduction of production volumes. In the second half of last year, companies decided to reduce activity in order to sell off stocks in warehouses and reduce the “demand-supply” imbalance.
As far as we can judge, everything worked out for the companies, and the South Korean corporation Samsung was especially successful in this. At first, it was going to gradually increase production, but then the management decided to reduce the volume of products produced.
The effect was immediate – already in the last quarter of 2023, RAM prices began to increase. In particular, the cost of DDR5 memory has increased by 10% or more. As for the previous generation of RAM, the price of DDR4 has increased about the same, the average figure is 10%. This was felt by both corporate clients and ordinary users. And this trend continues, so experts predict a 10-15% increase in prices in the first quarter of 2024.
As for the server segment, everything is not so terrible here, in the last quarter, prices have increased by an average of 5-10%, if we talk about DDR4 and DDR5. But in the near future, the situation may change, and prices will increase by another 15%. This is if we talk about modules for PCs and laptops. If we consider smartphones and tablets, then the price increase will be on average 20%, and this is not the most negative forecast. If manufacturers continue to reduce production volumes, the situation may become even more serious.
So what is the reason?
This time, the problem is not the pandemic or some other factors. It’s all about the manufacturers’ plans. Thus, in 2023, the largest DRAM manufacturers, Samsung, SK Hynix, and Micron, saw revenue decline by 25.1%, 35.2%, and 41.2%, respectively. This is a decrease compared to the indicators of the 3rd quarter of 2023. The situation is approximately the same in smaller companies. For example, sales of Nanya, Winbond and PSMC fell by 30%, 30.3% and 39.5% respectively.
Not everything is so bad at Samsung. In 2023, it managed to increase its market share to 45.1%, while from July to September 2022 this indicator was at the level of 40.7%. What exactly the South Korean corporation did to achieve such a result is not entirely clear. But the efforts were clearly not in vain.
But things are much worse for SK Hynix and Micron. Their market shares declined, from 28.8% in Q3 to 27.7% in the case of SK Hynix and from 26.4% to 23% in the case of Micron.
Accordingly, it is only about an artificially created deficit. There are no other prerequisites – because the demand for laptops and smartphones is not growing at all, accordingly, there can be no question of a natural imbalance. On the contrary, demand decreases, and in such a situation, prices should fall. But no – they are increasing, and the thing is the actions of the manufacturers.
None of this is speculation. The fact is that last year almost all manufacturers were going to reduce production volumes. So,
Micron planned to reduce production volumes by 10-20%, with the loading of its plants at only 84%. It is worth recalling that at the beginning of 2023 there was talk of the possible creation of new production lines. And now the situation has changed to the opposite.
As for SK Hynix, the company planned to reduce the load on its infrastructure by about 8% in the first quarter of 2023, and then by another 10%, to 82%.
As far as we can tell, everything worked out, and now a very long upward trend in RAM prices is in the offing. It is difficult to say how long it is, but producers can maintain an artificial deficit and further hope to reduce losses.
If RAM becomes more expensive, the cost of laptops, PCs and smartphones that use RAM will also increase. At the same time, the price increase will also take place in the market of video cards. For example, GDDR6 may increase in price by about 15% in the coming weeks. Accordingly, the cost of video cards, laptops and desktop PCs supplied with graphics adapters will increase.
If we talk about smart devices, TVs, etc., then in the near future, all this may increase in price by about 15%, which is unlikely to please buyers. However, nothing can be done for now – unless in the future demand will increase, manufacturers will increase production and prices will begin to fall.
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