Why DRAM Prices Could Remain Firm Over 2018

by Trefis Team
-16.35%
Downside
2400
Market
2008
Trefis
SSNLF
Samsung Electronics
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Global DRAM prices have been on the rise since June 2016, on account of higher DRAM content in mobile devices and significant under-supply of PC DRAM and a slowdown in capacity expansions. Per DRAMeXchange, supply in the market is projected to grow by 19.5% in 2017, well below demand, which could rise by 22%. DRAM prices have more than doubled over the last 12 months. Prices could remain firm over the next year as well, with Global DRAM bit supply forecast to grow by 19.6 % in 2018, with bit demand growing at a higher rate. In this note, we take a look at some of the factors that could drive DRAM prices over the next year.

See our complete analysis for Samsung and Micron

Big Three Producers Have Been Cautious About Capacity Expansions

The DRAM market is essentially a three player game, with Samsung (OTC:SSNLF), Micron and SK Hynix controlling much of the industry supply. These three companies have been circumspect about capital expenditures, focusing most of their investments on technology transitions and process optimizations rather than outright capacity expansions, as they look to keep prices 2018 at the similar levels as the second half of 2017. This could keep DRAM supply in check in the near term. For instance, the wafer start volumes for the big three suppliers is only expected to expand by 5% to 7% in 2018, according to TrendForce. While the build-out of some new fabs is underway, it’s unlikely that they will be ready for full-scale production until at least 2019, giving the major DRAM producers at least another year of strong pricing and margins.

Demand Could Remain Strong Driven By Mobile Devices And Server Market 

Demand for DRAM is also expected to remain robust amid continued demand from mobile vendors, who have been increasing the processing power of their devices as they look to cater to graphics-intensive applications such as gaming and virtual reality. For example, some of the latest Android flagship smartphones have 8 GB of RAM, equivalent to mid-range PCs. Trends such as machine learning and analytics are also stoking a need for more memory from the data center market. As DRAM demand is relatively inelastic, given that suppliers need a certain amount of DRAM to meet performance requirements, vendors may not be able to scale back significantly on DRAM purchases even if prices rise. This is in contrast to the NAND market, where buyers sometimes scale back on their purchases when prices rise.

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