DRAM pricing collapse continues in December

As of December 10, the contract price for a 2-gigabyte (GB) Double Data Rate 3 (DDR3) DRAM module stood at USD 21.00—down more than 50% from USD 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 USD 21.50 in December, compared to USD 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% of total DRAM bits shipped during the fourth quarter. 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% in 2010, is forecasted to 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. Nothing to stop freefall of prices Nonetheless, DRAM pricing appears to be reaching critical levels, Mr Howard noted, and nothing is likely to stop prices from continuing their slide during the next six months. In particular, as DDR 3 reaches USD 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 USD 1 per gigabyte in 2008, for instance, manufacturers with lagging process technology were forced to throttle down production. All told, DRAM prices will continue their descent for at least the first half of 2011, with 2GB DDR3 modules dipping to less than USD 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.