DRAM pricing continued to decline in December 2010 as levels plunged to their lowest point of the year, and nothing is likely to stop prices from continuing their slide during the next six months.
As of December 10, the contract price for a 2GB DDR3 DRAM module stood at US$21.00 - down more than 50% from US$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 US$21.50 in December compared to US$38.80 in June, the firm noted.
"DDR3 has faster transfer speeds and consumes less power than the older DDR2 device type," said Mike Howard. "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 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 continued. "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 OEM to load machines with more DRAM. DRAM content per PC, which grew by 24% in 2010, will expand by more than 33% in 2011. 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, the firm said.
Nonetheless, DRAM pricing appears to be reaching critical levels. As DDR 3 reaches US$1 per gigabyte, DRAM manufacturers operating at the 60nm process node will start to face the painful economics of costs exceeding prices. When prices dropped below US$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."
DRAM prices will continue their descent for at least the first half of 2011, with 2GB DDR3 modules dipping to less than US$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, which then could temporarily slow down or halt the drop in prices.