4GB DRAM module price climbed 11% in Jan

DRAMeXchange, a division of TrendForce, has revealed that as top-tier DRAM makers continue to cut shipments of commodity DRAM, price has become a secondary consideration for PC OEMs as they shift to secure their supply source. This change in strategy has

strengthened DRAM module prices, bringing 4GB module price to a high of $18 for 2HJan, a $0.50 or nearly three per cent increase over 1HJan. Average 4GB price for the entire month rose by 11.11 per cent, despite the weak demand on the DRAM market, added the market research firm.

In addition to the contract price rebound, TrendForce also said more PC OEMs are turning to module makers to secure supply. The two leading Korean DRAM makers have stated they will continue to cut commodity DRAM production in the future. The third and fourth largest suppliers, Micron and Elpida, will be making product mix adjustments after their merger is complete, and Taiwan manufacturers are gradually backing out of the DRAM industry. As a result, supply is decreasing rapidly, causing PC OEMs procurement difficulties.

PC makers are showing a desire to gradually increase inventory levels, and they are turning to module makers that they have not cooperated with as much in the past. Thus, the proportion of supply from module makers is rising, with some deals closing even higher than contract prices and approaching spot prices. The highest priced transaction was conducted at $20, a good sign for contract prices. TrendForce expects DRAM contract price will continue rising throughout the first quarter due to these supply changes.

As suppliers decrease commodity DRAM production, PC DRAM contract price increased over 10 per cent in January. Both suppliers and buyers are optimistic that contract prices will continue on an uptrend, eventually exceeding the Korean DRAM makers' fully loaded cost. Global PC DRAM prices will have a chance to surpass the $20 mark, which will benefit DRAM makers' profit margins. However, price increases will also suppress content per unit growth, making it unlikely that the 20 per cent growth that has been seen in previous years will continue.

According to TrendForce research, notebook content per unit will only increase from 4.1GB to 4.7GB this year, a mere 14.7 per cent increase and the slowest growth experienced in years. With the simplified, optimised design of Windows 8, there is no need for significant content per unit increases. Furthermore, as BOM cost for mainstream notebooks has already fallen below $500, there is little room for DRAM cost increases. Currently, average 4GB module contract price is $17.75, which represents 3.5 per cent of BOM cost. If prices continue to rise, reaching the $23-25 range, DRAM will exceed five per cent of BOM cost. Therefore, major PC makers are delaying content growth due to cost considerations. As a result, the content per unit growth this year may drop from the originally forecasted 14.7 per cent to about 10 per cent, at 4.5GB per unit, which will have a detrimental effect on PC DRAM consumption.

TrendForce noted that the industry is generally reserved towards PC shipments in 2013. With further shrinkage of the PC DRAM outlet due to the DRAM price rebound and suppressed content per unit growth, it is more certain than ever that DRAM suppliers will continue cutting commodity DRAM production.