The latest analysis by DRAMeXchange, a division of TrendForce, finds that average selling prices of various categories of DRAM products will increase significantly in the first quarter of 2017 as they continue to experience tight supply. The general price upswing that began in the second half of 2016 therefore will persist into the first quarter of this year despite the period being the traditional off-peak season. The contract prices of DDR3 4GB PC DRAM modules have reached a high of above US$25, and prices of DRAM products will see an estimated sequential quarterly increase of more than 30% on average, which would be a new record for the off-peak season.
"Looking at contract markets for DRAM products in the first quarter of 2017, prices of PC DRAM products are expected to go up by nearly 30% on average compared with the previous quarter while server DRAM products will also enjoy similar price hike,” said Avril Wu, research director of DRAMeXchange. “The average contract price of R-DIMM 32GB server DRAM modules has already broken through the US$200 ceiling and is expected to see a sequential quarterly increase of over 20%. As for mobile DRAM products, their demand continues to grow as Chinese smartphone brands stock up for the upcoming Chinese New Year promotions. Contract prices of discrete products and eMCP solutions are projected to increase by over 10% versus the fourth quarter of 2016.”
Undersupply of DRAM products may last through the entire 2017 due to strong demand growth in mobile and server application markets
DRAM suppliers made production capacity adjustments to increase their outputs of mobile DRAM products in 2016 in response to the strong demand from Chinese smartphone brands that have expanded aggressively worldwide. This in turn has led to falling supply and rising prices for PC DRAM. Along with the significant turnaround in the average contract price of DDR3 4GB PC DRAM modules, server DRAM products have also experienced huge price increases.
The continuing price increase for PC DRAM products in the first quarter of 2017 will have a positive influence on the markets for other types of DRAM products. Prices of mobile DRAM products is estimated to rise by nearly 15% on average compared with the last quarter. As for graphics and other specialty DRAM products, the average sequential quarterly increases in their respective prices are projected to exceed 10%.
DRAM suppliers are expected to be more conservative with regard to their capital expenditures in 2017 and will not undertake unnecessary capacity expansion efforts in order to keep their profits high. DRAMeXchange estimates that the global DRAM bit supply will grow by just 19% annually in 2017, far below rates of at least 20% to more than 30% in the past years. Conversely, the annual expansion of the DRAM bit demand worldwide is estimated to surpass 20% this year. On account of this great market imbalance, DRAMeXchange expects DRAM products as a whole will generally be in short supply through 2017.
Among the different application markets, mobile DRAM products will continue to exhibit the strongest demand growth in 2017. Branded smartphone makers are expected to upgrade memory specifications of their flagship devices to 8GB. At the same time, most mid-range models will be upgraded to 4GB. DRAMeXchange estimates that the average DRAM content per box in smartphones will increase by more than 30% in 2017 compared with last year and again surpass the average memory content in notebooks.
Additionally, demand for server DRAM has risen significantly owing to the rapid growth of cloud computing services. According to DRAMeXchange's analysis, the DRAM content per box for servers will increase to at least 130GB in 2017. Furthermore, China’s demand for server DRAM will be above the global average. DRAM suppliers therefore will continue to allocate more of their existing manufacturing capacity to the production of mobile and server products during 2017. Some DRAM products outside of server and mobile applications will also suffer extremely tight supply and may even be vulnerable to shortages. While suppliers will make advancements in their manufacturing technologies, they are doing so mainly to satisfy specific demands from their clients rather than for the purpose of increasing their outputs. On the whole, the general undersupply in the market will make 2017 a very profitable year for suppliers.