DRAM prices slide as the semiconductor industry starts to decline

DRAM spot prices are experiencing a downturn because of an influx of used chips and oversupply, new research from Taiwan’s TrendForce and DigiTimes has shown. 

DRAM prices are usually a leading indicator of the broader health of the semiconductor market, and recent data from IDC shows that the total semiconductor industry is expected to decline by 12% in 2023. According to TrendForce’s analysis of the distribution of the DRAM industry’s total bit output for 2023, server DRAM is estimated to comprise around 37.6%, whereas mobile DRAM is estimated to comprise around 36.8%.

While prices for DDR4 chips have been dropping, prices of DDR5, which is commonly used in high-end smartphones, remain stable, research firm TrendForce shared in a note.

Market data shows that NAND Flash demand weakened after Singles’ Day, yet 512Gb wafer prices continued to rise, reaching $2.862 due to reduced supply, outpacing the sluggish DRAM market, TrendForce wrote.

The market faces mixed conditions, according to Taipei-based Digitimes, a chip trade publication.

While some DRAM prices are sluggish, like DDR4, demand remains strong for DDR5 owing to strong mobile and server demand. There’s not the same market for used chips for DDR5 as there is for DDR4, hence the continued pricing growth.

Memory manufacturers are also continuing production cuts into 2024 as they are still facing a red wall of losses despite decreasing inventories, Digitimes noted.

TSMC decreasing prices

The return to growth for the semiconductor industry in 2024 is largely going to be on the back of demand for AI and data centers, which will need advanced RAM like DDR5 and chips fabbed on the latest process nodes, continuing the opposing trajectory narrative of the broader semiconductor and chip market.  

TSMC is reported to be cutting production runs on its mature process nodes as a glut of older chips in the market is putting downward pricing pressure on DDR4.

Wafer foundries in Taiwan are preparing for intense competition from their Chinese and South Korean counterparts by adopting flexible pricing strategies and planning a 10% price cut in response to the expected completion of 32 advanced wafer fabs in China by next year, amidst a market that favors buyers, Taiwan’s Commercial Times reported.

Counterpoint Research Associate Director Brady Wang couldn’t confirm the reports of pricing cuts, but he did say that it’s well-known in the industry that mature manufacturing processes are currently in oversupply while their demand hasn’t increased.

“Foundries offering these mature technologies face pressure to lower prices. TSMC, as the industry leader is known for superior product quality, would only reduce prices if their clients believe the price quote gap is big enough to outweigh the benefits of its quality,” Wang said. A reduction in TSMC’s mature capacity pricing, which contributes about 17% to its total revenue, is unlikely to significantly impact TSMC, as it mainly derives its margin from advanced processes, Wang explained.