(December 21, 2010) — DRAM continued to head down a grim path of unstoppable decline in December, as pricing levels plunged to their lowest point of the year after months of dramatic decline, according to market research ?rm iSuppli, now part of IHS Inc. (NYSE: IHS).
As of December 10, the contract price for a 2-gigabyte (GB) Double Data Rate 3 (DDR3) DRAM module stood at $21.00 — down more than 50% from $44.40 in June. Prices also have plummeted in the previous-generation DDR 2 devices — now at a nadir of $21.50, compared to $38.80 in June.
DDR3 has faster transfer speeds and consumes less power than the older DDR2 device type. However, prices have fallen faster for DDR3 than for the other varieties of DRAM because of its high volume, accounting for more than 60% of total memory bits shipped during the fourth quarter.
DRAM prices have been affected by generally soft PC demand — especially during the first half of 2010 — and greater supply of commodity memory following a solid increase in bit shipments during the second half. Falling demand and growing supply combine to pressure DRAM average selling prices (ASPs), reports iSuppli’s Mike Howard.
The decline in prices means that it has become considerably less expensive for PC original equipment manufacturers (OEM) to load machines with more DRAM. DRAM content per PC, which grew by 24% in 2010, is forecasted to expand by more than 33% in 2011, iSuppli memory forecasts show. And as long as DRAM costs equate to less than 10% of the ASP for PCs, manufacturers will continue to increase the memory content in their computers.
Nonetheless, DRAM pricing appears to be reaching critical levels, and nothing is likely to stop prices from continuing their slide in the next six months. In particular, as DDR3 reaches $1 per gigabyte, DRAM manufacturers operating at the 60-nm process node will start to face the painful economics of costs exceeding prices, iSuppli believes. In 2008 when prices dropped below $1 per gigabyte, manufacturers with lagging process technology were forced to throttle down production.
In coming months, watch how far ahead of costs DRAM companies can stay in order to maintain normal operations. With leading DRAM processing already at the 3x-nm node, working in the older, less efficient 6x-nm and 5x-nm nodes will not be as cost effective, incurring higher costs and shrinking margins as a result.
DRAM prices will continue their descent for at least the first half of 2011, with 2GB DDR3 modules dipping to less than $15 by the end of the second quarter. After that, the balance between supply and demand is expected to be more favorable, which then could temporarily slow down or halt the drop in prices.
Read "DRAM Pricing Continues to Collapse," at http://www.isuppli.com/Memory-and-Storage/Pages/DRAM-Pricing-Continues-to-Collapse.aspx?MWX
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