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DRAM Pricing Collapse Continues in December

EL SEGUNDO, CA — DRAM pricing continued to decline in December, as levels plunged to their lowest point of the year, according to the market research firm 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 percent from $44.40 just six months ago in June. The dive in pricing is not restricted to DDR3 alone: Prices also have plummeted in the previous-generation DDR2 devices—declining to $21.50 in December, compared to $38.80 in June.

DDR3 has faster transfer speeds and consumes less power than the older DDR2 device type, noted Mike Howard, principal analyst for DRAM and memory at iSuppli. However, prices have fallen faster for DDR3 than for the other varieties of DRAM because of its high volume, accounting for more than 60 percent of total DRAM bits shipped during the fourth quarter.

“DRAM prices in general have been affected by soft PC demand—especially during the first half of 2010—as well as by greater supply of commodity memory following a solid increase in bit shipments during the second half,” Howard said. “That lethal combination of falling demand and growing supply has coalesced to place a great deal of pressure on DRAM ASPs.”

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 percent in 2010, is forecasted to expand by more than 33 percent in 2011. And as long as DRAM costs equate to less than 10 percent of the ASP for PCs, manufacturers will continue to increase the memory content in their computers.

Nothing to stop freefall of prices
Nonetheless, DRAM pricing appears to be reaching critical levels, Howard noted, and nothing is likely to stop prices from continuing their slide during the next six months.

In particular, as DDR 3 reaches $1 per gigabyte, DRAM manufacturers operating at the 60-nanometer (nm) process node will start to face the painful economics of costs exceeding prices, iSuppli believes. When prices dropped below $1 per gigabyte in 2008, for instance, manufacturers with lagging process technology were forced to throttle down production.

“The dynamic that bears watching in the coming months will be how far DRAM companies can stay ahead of costs in order to maintain normal operations,” Howard observed. “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 during the coming months, and higher costs and shrinking margins will be incurred as a result.”

All told, 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 at the end of the second half next year, which then could temporarily slow down or halt the drop in prices.

Learn more about the latest developments in the DRAM market with the recent brief, entitled DRAM Pricing Continues to Collapse at: iSuppli

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