DRAM prices to drop 3-8% due to Ukraine war, inflation
Wait, we’ll explain
As the world continues to grapple with unrelenting inflation for many products and services, the trend of rising prices is expected to have the opposite impact on memory chips for PCs, servers, smartphones, graphics processors, and other devices.
Taiwanese research firm TrendForce said Monday that DRAM pricing for commercial buyers is forecast to drop around three to eight percent across those markets in the third quarter compared to the previous three months. Even prices for DDR5 modules in the PC market could drop as much as five percent from July to September.
This could result in DRAM buyers, such as system vendors and distributors, reducing prices for end users if they hope to stimulate demand in markets like PC and smartphones where sales have waned. We suppose they could try to profit on the decreased memory prices, but with many people tightening their budgets, we hope this won't be the case.
The culprit for the DRAM price drop is one that we've been hearing a great deal about in the past few months: weaker demand for consumer electronics, including PCs and smartphones, as a result of high inflation and Russia's ongoing invasion of Ukraine, according to TrendForce.
The weaker consumer demand means DRAM inventories are building up at system vendors and distributors, which means they don't need to buy as much in the near future. This, in turn, is why memory prices are dropping, the research firm said.
On the PC side, DDR4 memory pricing is expected to drop three to eight percent in the third quarter of 2022 after only seeing a zero to five percent decline in the second quarter. DDR5 pricing, on the other hand, is set to drop by only zero to five percent in Q3 after seeing a three to eight percent plummet in the previous quarter.
For certain DRAM products, prices could see a steeper decline of more than eight percent, according to TrendForce, though the firm didn't say which products this would include.
TrendForce said PC makers are focused on getting rid of their existing DRAM inventories, and a continuously "sluggish" market means they'll be reticent to buy much more memory.
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Smartphone vendors are experiencing a similar situation, and another issue impacting DRAM demand in the market is slow sales growth for phones with higher memory capacities. This is why TrendForce is forecasting smartphone DRAM pricing to drop three to eight percent in the third quarter.
In the server world, DRAM pricing is expected to drop zero to five percent in the third quarter. This is because memory supply is higher than demand, plus uncertainty in the PC and smartphone markets is prompting suppliers to switch DRAM production over to the server side, according to TrendForce.
The expected server DRAM price decline in Q3, which roughly mirrors what happened in the second quarter, is coming despite efforts by memory suppliers to keep memory pricing stable through measures such as price binding agreements and an increase in on-hand inventories.
When it comes to memory used for graphics chips, weaker demand for the product category is expected to result in a zero to five percent drop in DRAM prices for the market, a repeat of what happened in the second quarter.
If the coming drop in DRAM prices doesn't help stimulate demand for graphics chips, suppliers will try to keep memory pricing from dropping even further, TrendForce said.
For consumer electronics, TrendForce estimated that DRAM pricing will drop three to eight percent after only seeing a zero to five percent decline in the second quarter. This is because inflation, the Russian-Ukrainian war, and COVID-19 lockdowns in China have weakened demand for devices like TVs and laptops, according to the firm.
One quick takeaway: if system vendors and distributors pass on the savings from the coming DRAM price drop, the third quarter could end up being a good time to buy, build, or upgrade a high-end PC, given that prices for graphics cards have also been dropping over the past few months. ®