Pricing of RAM to plunge, analyst says

The price of DDR3 memory used in laptops, desktops and servers will drop over the next two months as memory companies try to clear out excess inventory in a slowing PC market, IHS iSuppli said on Monday.

The average selling price of DDR3 RAM with a 2-gigabit density will reach US$1.60 later in the third quarter, down from $2.10 today, said IHS iSuppli in a research note. The price of DDR3 DRAM was around $4.70 in the third quarter a year ago, when the market had not saturated and adoption was growing to replace DDR2 memory, its predecessor.

The price could plummet further to $1.25 in the fourth quarter, said Mike Howard, senior analyst for DRAM at iSuppli.

A shortfall in PC demand has softened DDR3 memory pricing this year, and PC makers are unwilling to add more memory to computers as they try to increase profitability in the low-margin PC market, Howard said. Some memory makers will move excess inventory into the market rapidly, which could lead to a price drop.

"It's a double whammy," Howard said. "PC growth has slowed down and users aren't demanding more memory."

The world's top DRAM makers include Samsung, Hynix Semiconductor, Elpida Memory, Micron and Nanya, some of which are having yield and supply issues that are contributing to the price plunge, iSuppli said.

The DRAM market fell apart at the end of 2008 and the oversupply today is a result of the previous down cycle, Howard said. The economic downturn prompted DRAM makers to reduce output at the end of 2008, but as PC demand recovered the following year memory production also increased. The demand for memory went up partly due to the PC refresh cycle and the release of the 64-bit version of Windows 7 in 2009, which allowed for a higher memory ceiling.

But PC shipments started slowing down in the second half last year partly because of the growing demand for tablets and smartphones, which use different memory types such as LP DDR2 memory and nonvolatile NAND flash memory. The DRAM market volatility has prompted memory makers to change business models and increase focus on making memory for tablets and smartphones, Howard said.

PC makers are also considering using mobile memory for a new class of low-power laptops called Ultrabooks, which are being promoted by Intel as an alternative to tablet PCs, Howard said. PC makers are especially considering LP DDR2 as it would fit into the thin and light profile of Ultrabooks, and that could ultimately hurt demand for DDR3 memory.

The continued down cycle for DDR3 could also speed up the development of DDR4, which is a faster and more power-efficient successor. DDR4 memory could reach customers in 2014, which is a year earlier than expected, Howard said. Servers will be the first to adopt DDR4 and play an increased role in driving demand for the memory type. The cloud will encourage solid loading of DDR4 memory in servers, Howard said.

But with the mobile device market growing, focus is also on the development of LP DDR3, the successor to LP DDR2, Howard said. LP DDR3 memory is expected to hit the mainstream market around the same time as DDR4, which is 2014.

"LP DDR3 will become official in JEDEC this fall," and working silicon is expected some time next year, Howard said. JEDEC (Joint Electron Device Engineering Council) is a memory standards-setting organization developing specifications for DDR4 and LP DDR3.

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