Average selling price for 2GB DDR3 projected to drop to $1.60
Oversupply and dip in prices are expected in the third quarter for the dynamic random access memory (DRAM) space, according to information and analysis provider IHS iSuppli.
According to a new DRAM Market Brief from IHS, the average selling price for Double Data Rate 3 (DDR) in the 2GB density is projected to drop to $1.60 in the third quarter, down 24% from $2.10 in the second quarter.
The dive, which follows a surprisingly solid second quarter during which pricing fell only 5% from the first quarter, would be the biggest decline for the year, said IHS.
The firm has projected that moving into the fourth quarter, the price could plummet another 22% to $1.25 — dangerously close to cash costs for many manufacturers. Pricing stood at $4.70 a year ago in the third quarter,.
IHS DRAM and memory principal analyst Mike Howard said contrary to typical seasonal patterns in which prices are very soft during the second quarter, that period this year saw relatively flat, unchanged DRAM pricing compared to the first quarter.
Howard added, "However, companies did not capitalise on the healthy pricing levels to increase shipments in the second quarter — which, in retrospect, may have been the best time to do so."
DRAM manufacturers attribute the low growth in shipments in the second quarter to two primary reasons: bloated inventory and challenges in transitioning to new process technologies, said IHS.
However, IHS believes DRAM companies not only will shift inventory rapidly but also will move quickly up the yield curve. As a result, the events of the second quarter will not continue for long this year.
"The third quarter is shaping up to be pretty bloody for DRAM makers," Howard noted.
"The combination of inventory reductions by DRAM makers and more bits coming out of the fabs is resulting in a very soft pricing environment."
As much as a 15.9% increase in shipments is anticipated in the third quarter, and prices are not expected to firm up anytime soon because of that, IHS said.
The firm said that a weakening DRAM market will encourage manufacturers to optimise their product mix, moving toward increased production of a higher-margin memory such as NAND flash. And for manufacturers still weighed down by lagging technology, capacity could be cut back to reduce overall DRAM supply in the market.
Both these measures could help stabilise DRAM prices, said IHS.