IHS iSuppli: DRAM Prices on Verge of Freefalling

Posted 08/30/2011 at 10:05am | by Paul Lilly

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The law of gravity dictates that what goes up must come down, and unfortunately for DRAM chip makers, there's nothing that says what goes down must also go back up. DRAM pricing continues to find new rock bottoms, and according to market research firm IHS iSuppli, things are about to get a whole lot worse.

IHS iSuppli predicts a "dramatic oversupply and freefalling prices" will take place in the DRAM market during the third quarter, "resulting in a turbulent second half for besieged DRAM suppliers." That's some pretty heavy language for a data heavy research firm, and it underscores just how bad the situation has become.

"Contrary to typical seasonal patterns in which prices are very soft during the second quarter, that period this year saw relatively flat, unchanged DRAM pricing compared to the first quarter," said Mike Howard, principal analyst, DRAM and memory, at IHS. "However, companies did not capitalize on the healthy pricing levels to increase shipments in the second quarter—which, in retrospect, may have been the best time to do so."

According to IHS iSuppli, 2Gb (gigabit) DDR3 memory chips will fall to $1.60 in the third quarter, a 24 percent drop from the already bargain basement price of $2.10. If the prediction comes true, it would rank as the biggest dive of the year, IHS iSuppli says. DRAM makers hoping to find relief in the fourth quarter are in a rude awakening, as prices are expected to plummet an additional 22 percent to $1.25, "dangerously close to cash costs for many manufacturers." That's in stark contrast to Q3 2010, in which those same chips sold for $4.70.

"The third quarter is shaping up to be pretty bloody for DRAM makers," Howard noted. “The combination of inventory reductions by DRAM makers and more bits coming out of the fabs is resulting in a very soft pricing environment."