Price of DRAM plunges to all-time low of around $1

DDR3 DRAM prices will continue to fall and possibly stabilize in the second half, analysts said

Prices of DDR3 DRAM memory used in laptops and desktops have dipped to an all-time low of around $1, and will continue to fall, which could help PC makers pack more memory into computers, analysts said.

Average prices for predominant 2Gb (gigabit) DDR3 DRAM die hit the $1 mark during the first quarter, which is a massive drop from the average price of roughly $2.25 for the same memory in the first quarter last year, according to research firm iSuppli. A 4GB (gigabyte) DRAM module was priced between $18 and $20 at the end of 2011, a precipitous drop from $40 at the end of 2010.

The price of a 2Gb DRAM chip was between $0.82 and $0.95 on Wednesday, according to DRAMExchange, a website that tracks daily memory pricing.

The drop in memory prices is a continuation of a trend from last year, analysts said. A shortfall in PC demand hurt memory pricing last year, but memory makers are still moving excess inventory into the market rapidly, which has contributed to the continued price drop.

"We're at a historical all-time low, yes," said Mike Howard, senior principal analyst at IHS iSuppli. "It costs Dell and Hewlett-Packard less now than a year ago to put the same amount of memory in the PC."

Instead of packing more memory, some PC makers have opted to load the same amount of memory in PCs to cover the rising cost of other components. Dell earlier this week said it was using the favorable memory and LCD pricing environment to offset the rising prices of hard drives, which were in short supply due to the floods in Thailand last year.

Enthusiast PC maker Falcon Northwest, which makes high-end PCs for enthusiasts such as gamers, said the favorable pricing environment has allowed the company to load amounts of memory previously considered inconceivable. That is significant as RAM usage is increasing considerably among power users.

"You can do server-only 32GB memory in the desktop very cheaply," said Kelt Reeves, CEO of Falcon Northwest.

But any cost benefits gained from memory are reversed by the hard-drive shortage, which remains a drain on Falcon Northwest. The company's clients want high-capacity 1TB or 2TB hard drives, which are expensive and in short supply. The hard-drive issue will linger for a while, Reeves said.

"We thought it would ease, but it hasn't," Reeves said.

The DRAM industry fundamentals are weak, but memory makers are taking corrective action to balance supply and demand, iSuppli's Howard said. Some of the existing manufacturing capacity is coming offline to reduce output, but the prices could continue to fall as long as the cost of making memory drops.

The pricing will continue to fall through the second quarter, said Shane Rau, research director at IDC.

"The issue is huge oversupply in the first and second quarter of 2012 and the resulting pricing competition among suppliers," Rau said.

IDC is projecting contract pricing for 2Gb DRAM in the first quarter to average $1.40, with the price coming down to $1.22 in the second quarter. That price will be flat at roughly $1.20 in 2012, but dip to under $0.89 in 2013.

The DRAM market initially fell apart at the end of 2008 after the economic downturn prompted DRAM makers to reduce memory output. However, production went up the following year as PC demand recovered with the active refresh cycle and the release of the 64-bit version of Windows 7 in 2009, which allowed for a higher memory ceiling.

But PC shipments slowed down again in the second half of 2010 with growing demand for tablets and smartphones, which rely on different memory types such as low-power DDR and nonvolatile NAND flash memory. Some chip makers have now changed business models and are increasing focus on memory for tablets and smartphones.

But even in the down market, there are exceptions. Prices are rising for 8GB DDR3 DRAM modules, which are rare and expensive. The DIMMs are based on the new higher-capacity 4Gb die, for which advanced manufacturing technologies are needed. Only a few companies like Samsung and Hynix have the manufacturing capacity to make these chips.

"Physically it's bigger, and the prices on those die are a little more resilient on a dollar-per-gigabit basis," Howard said.

There is also a lot of momentum going into the development of DDR4 memory, which is the successor to DDR3. DDR4 memory could reach customers in 2014, and is expected to first go into servers.

There are also alternatives to DRAM such as MRAM (magnetoresistive random-access memory), Hybrid Memory Cube and PCM (phase-change memory) under development, Howard said. The memory types are just getting out of research and development and are not yet available in significant volumes to replace DDR3.

"To replace DRAM, you need to be ready to go into millions of PCs and billions of mobile devices," Howard said.

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