In the spot market, DRAM prices are showing a slight divergence from the contract market. Spot demand has decreased, preventing further price increases for DRAM chips. Meanwhile, NAND Flash prices have been rising due to ongoing wafer shortage. However, spot quotations for NAND Flash packaged dies remain stable due to uncertain demand visibility.

DRAM Spot Market

The price trend of the spot market diverges slightly from that of the contract market. Recently, demand has dropped in the spot market. Even though DRAM suppliers and module houses have been passive in offering price concessions, there also has been no noticeable increase in demand. Furthermore, there is growing sentiment in the spot market that waiting for further developments is the best option. Hence, spot prices of DRAM chips have not been able to rise further. As for modules, their spot prices have experienced limited fluctuations because Kingston, as the leading module house, is unwilling to raise quotes due to its high inventory level. The average spot price of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s) rose by 1.69% from US$1.600 last week to US$1.627 this week.

NAND Flash Spot Market

The spot market, due to continuous shortages in recent wafer supply, has been experiencing rising prices under a shrinking volume, while spot quotations for NAND Flash packaged dies have been oscillating narrowly in quotations on account of the persistently constrained level of visibility in demand. Follow ups on market prices can still be seen among products involved in production cuts of suppliers, whereas other products are fluctuating according to market demand. 512Gb TLC wafer spots have risen by 6.94% this week, arriving at US$2.464.

TrendForce reports indicate a universal price increase for both DRAM and NAND Flash starting in the fourth quarter. DRAM prices, for instance, are projected to see a quarterly surge of about 3-8%. Whether this upward momentum can be sustained will hinge on the suppliers’ steadfastness in maintaining production cuts and the degree of resurgence in actual demand, with the general-purpose server market being a critical determinant.

PC DRAM: DDR5 prices, having already surged in the third quarter, are expected to maintain their upward trajectory, fueled by the stocking of new CPU models. This forthcoming price hike cycle for both DDR4 and DDR5 is incentivizing PC OEMs to proceed with purchases. Although manufacturers still have substantial inventory and there’s no imminent shortage, Samsung has been nudged to further slash its production. However, facing negative gross margins on DRAM products, most manufacturers are resistant to further price reductions, instead pushing for aggressive increases. This stance sets the stage for an anticipated rise in DDR4 prices by 0–5% and DDR5 prices by around 3–8% in the fourth quarter. Overall, as DDR5 adoption accelerates, an approximate 3–8% quarterly increase is projected for PC DRAM contract prices during this period.

Server DRAM: Buyer inventory of DDR5 has climbed from 20% in Q2 to 30–35% recently. However, with only 15% being actually utilized in servers in Q3, market uptake is slower than expected. Meanwhile, Samsung’s intensified production cutbacks have notably shrunk DDR4 wafer inputs, causing a supply crunch in server DDR4 stocks. This scenario leaves no leeway for further server DDR4 price reductions. In response, manufacturers, aiming to enhance profits, are accelerating DDR5 output.

Looking ahead, Q4 forecasts anticipate stable server DDR4 average prices, while server DDR5 is set to maintain a declining trajectory. With DDR5 shipments on the rise and a notable 50-60% price disparity with DDR4, the blended ASP for the range is poised for an upswing. This leads to an estimated 3–8% quarterly hike in Q4 server DRAM contract prices.

Mobile DRAM: Inventories have bounced back to healthy levels sooner than other sectors, thanks to price elasticity driving an increase in per-device capacity, and revitalizing purchasing enthusiasm in 2H23. On the other hand, although Q4 smartphone production hasn’t reached the previous year’s levels for the same period, a seasonal increase of over 10% is still supporting demand for mobile DRAM. However, it’s crucial to note that current manufacturer inventories remain high, and production cuts haven’t yet altered the oversupply situation in the short term. Nevertheless, manufacturers, under profit margin pressures, are insisting on pushing prices upward. For products where inventory is more abundant, such as LPDDR4X or those from older manufacturing processes, the estimated contract price increase will be about 3–8% for the quarter. In contrast, LPDDR5(X) appears to be in tighter supply, with projected contract price increases of 5–10%.

Graphics DRAM: A niche market dynamic and an acceptance of price hikes among buyers suggest sustained procurement of mainstream GDDR6 16Gb chips, preparing for expected price increases in 2024. The launch of NVIDIA’s new Server GPU L40s in the third quarter is facilitating the depletion of existing manufacturer inventories. Furthermore, gaming notebooks are excelling in sales, surpassing the general notebook market this year. Consequently, manufacturers are experiencing less inventory stress for graphics DRAM than they are for commodity DRAM. This landscape sets the stage for an anticipated 3-8% hike in graphics DRAM contract prices for the fourth quarter.

Consumer DRAM: Samsung initiated significant production reductions starting in September to diminish its surplus of older inventory. These cuts are projected to hit 30% by the fourth quarter. With the anticipation of steadily declining inventories, manufacturers are looking to increase consumer DRAM contract prices, aiming for hikes of more than 10%, to avoid incurring losses. However, even though some producers raised their prices at September’s close, demand continues to be lackluster, with purchasing and stock-up efforts not as strong as anticipated. This deviation in pricing goes against the expected supply-demand balance, suggesting a more modest estimated rise of 3–8% in consumer DRAM contract prices for the fourth quarter—below manufacturers’ initial targets.

DRAM Spot Market
Compared with last week, transaction prices in the spot market have generally stopped falling, but there is no sustained upward momentum. Although suppliers and other spot sellers have been firm on prices and are unwilling to make further concessions, the overall transaction volume has continued to shrink because there has been no turnaround in the demand for end products. Further observations are needed to determine the trajectory of spot prices in the future. Nevertheless, TrendForce believes that suppliers will need to further expand the scale of their production cuts in 4Q23 in order to effectively reduce their existing inventories. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) dropped by 0.07% from US$1.451 last week to US$1.450 this week.

NAND Flash Spot Market
Concluded prices have largely leveled to that of last week without dynamics for ongoing increment. Buyers, despite active stocking behaviors seen recently, are no longer following up on prices aggressively under the yet-to-be-improved level of actual end demand. Subsequent spot price trends will require further observation, though TrendForce believes that NAND Flash suppliers would be forced to expand production cuts during 4Q23 so as to further abate their existing inventory. 512Gb TLC wafer spots have risen by 0.63% this week, arriving at US$1.588.

According to a report from Taiwan’s TechNews, the NAND Flash industry is gradually recovering in pricing as suppliers continue to reduce production. However, achieving a healthy market balance in terms of supply, demand, and pricing is expected to require more time and effort.

Regarding the memory market situation, TrendForce indicates that the reduction strategies for DRAM and NAND Flash by memory manufacturers are expected to continue into 2024. This is especially evident for the heavily loss-making NAND Flash segment. Despite TrendForce’s projection that visibility into consumer electronics market demand for the first half of 2024 remains uncertain, and with general server capital expenditures still weakened by AI server displacement, the memory market is anticipated to exhibit relatively weak demand.

Yet, TrendForce states, due to the low base in 2023 and certain memory product prices having reached comparatively low levels, DRAM and NAND Flash are forecasted to experience year-over-year growth rates of 13% and 16%, respectively.

On the other hand, even with demand picking up, effectively destocking and restoring supply-demand equilibrium in 2024 hinges on suppliers exercising restraint over production capacity. Once suppliers manage their production capacity appropriately, there’s a possibility for a rebound in the average memory prices.

Nomura Securities notes in their report that since late August 2023, NAND Flash prices have seen double-digit increases. This has largely resulted from the escalating scale of NAND Flash production cuts and the downstream inventory for smartphones and related components being low. Additionally, different brands have been launching new products over the past few months.

Citigroup’s recent update on global memory average selling price outlook reveals significant reductions in production volumes, including major memory manufacturers like Samsung. Memory manufacturers are expected to prevent further decline in memory average prices through substantial production cuts, as further decline could threaten the cash cost level of NAND Flash. Therefore, Samsung’s meaningful reduction in memory product production is expected to contribute to stabilizing the average memory selling price in 2023 and laying the groundwork for a stable recovery in the average memory market selling price throughout 2024.

DRAM buyers were aggressively stocking up during 1H21 because quotes began to rise at the start of the year, and there were concerns about shortages in the supply chain, according to TrendForce’s latest investigations. To avoid the risk of a supply crunch, most DRAM buyers kept raising their demand until the middle of the year. Moving into this second half of the year, the COVID-19 pandemic has exacerbated component gaps, the adverse effect of which on OEMs’ ability to assemble their end products has widened as well. Due to having a glut of memory and a shortage of other key components, some OEMs have opted to scale back DRAM procurement. PC OEMs have especially become noticeably restrained in this regard. Fortunately, the server-related segment of the market has been propping up the overall demand; and because of this, most DRAM suppliers were able to post a marginal growth in shipments for 3Q21. Additionally, quotes for DRAM product also kept rising in 3Q21. On account of these factors, the quarterly total DRAM revenue rose again by 10.2% QoQ to US$26.6 billion for 3Q21.

Regarding 4Q21, DRAM buyers that are already carrying a high level of inventory will probably adopt an even more conservative stance, as OEMs are still affected by component gaps in the supply chain while also preparing for stock-taking at the end of the year. Without adequate demand for support, DRAM prices on the whole are going to make a downward turn in 4Q21 and thereby end this short three-quarter period of cyclical price upturn. Also, since 4Q21 is going to be the first quarter in the general downtrend in quotes, buyers anticipate further price reductions in the future and are more reluctant to stock up in the near term. Declines in quotes will continue to widen as a result. With demand shrinking and prices falling, the DRAM industry will inevitably experience a drop in revenue as well.

DRAM suppliers saw higher profits in 3Q21 because of rising prices and growth in output shares of more advanced process technologies

Looking at the performances of individual DRAM suppliers for 3Q21, the three dominant suppliers all had positive revenue growth but diverged slightly in bit shipments. Samsung and Micron posted a small QoQ increase in their respective bit shipments, whereas SK hynix posted a small QoQ drop. The rise in quotes was able to offset the weakening momentum in bit shipments, so the top three suppliers managed to again raise their revenues from the previous quarter. Samsung’s, Sk hynix’s, and Micron’s QoQ revenue growth rates came to 11%, 8%, and 12% respectively. While their growth rates were still around the 10% level, they were more modest compared with the previous quarter. In the ranking by revenue market share, Samsung remained at the top with its market share expanding further to 44%. SK hynix and Micron were still at second and third place respectively. The former’s market share shrank a bit to 27.2% due to the decline in bit shipments, whereas the latter’s market share grew slightly to 22.9%.

In terms of profitability, 3Q21 saw continuing improvements thanks to rising quotes and growth in the output shares of the more advanced process technologies. Samsung raised its operating margin to 53% in 3Q21 as the share of 1Z nm products in its output kept growing. As such, Samsung’s operating margin reached almost to the high of nearly three years ago. Likewise, SK hynix’s operating margin grew to 47% in 3Q21 because of the increase in the output share of 1Z nm products. As for third-largest supplier Micron, the increase in its ASP for its latest fiscal quarter (June to August) is similar to the increases in the two South Korean suppliers’ respective ASPs for 3Q21. Its operating margin also rose to 42% for this period. Moving into 4Q21, TrendForce expects the slide in DRAM prices to be an inescapable trend. Whether individual suppliers will be able to maintain a high level of profitability depends on their own progress in process migration and yield rate improvement.

While the specialty DRAM market weakened in 3Q21, Taiwanese suppliers trailed closely behind the three dominant suppliers

Compared with mainstream DRAM products, specialty DRAM underwent a higher magnitude of price hikes in 1H21. Hence, as demand for TVs and other consumer electronics fell in 3Q21, and supply chain disruptions persisted, clients in turn reduced their DRAM procurement. This reduced demand indirectly impacted the revenue performances of Taiwanese suppliers, which primarily target the consumer electronics market. Nanya Tech continued to raise its quarterly ASP in order to offset weak shipment. The company’s revenue increased by about 6% QoQ in 3Q21, while its operating profit margin also increased from 31.2% in 2Q21 to 38.1% in 3Q21 due to the price hike. Winbond benefitted from high demand for its low-density (1/2Gb) products and recorded a nearly 13% QoQ increase in DRAM revenue in 3Q21. Among all Taiwanese suppliers, Winbond registered the strongest revenue growth during the quarter.

Nevertheless, TrendForce’s investigations also find that the physical spaces within the two aforementioned Taiwanese suppliers’ fabs are now fully occupied, meaning the suppliers are unable to install additional equipment in these fabs before building new fabs. Hence, these suppliers’ financial performances will be heavily impacted by their ASPs in the short run. For instance, Nanya Tech’s new facilities will not contribute to DRAM production until construction finalizes in 2024. In the short run, Nanya Tech is able to slightly increase its DRAM bit shipment only through migrating to the advanced 1A/1B nm process technologies. Similarly, Winbond will be able to continue expanding its production capacity only after its new fab located in Luzhu, Kaohsiung kicks off mass production in 2H22. As for PSMC, its revenue from sales of PC DRAM products manufactured in-house increased by about 6% QoQ in 3Q21. However, PSMC’s total revenue from both sales of in-house DRAM and its DRAM foundry business increased by 12% QoQ in 3Q21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com