For almost two years there has been a lot of worry about DRAM spot prices. This post’s graphic plots the lowest weekly spot price per gigabyte for the cheapest DRAM, regardless of density, on a semi-logarithmic scale. (Remember that on a semi-logarithmic scale constant growth appears as a straight line.)
The downward-sloping red line on right side of the chart shows that DRAM prices have been sliding at a 45% annual rate since October 2014. This has a lot of people worried for the health of the industry.
What most fail to remember, though, is that DRAM spot prices hit their lowest point twice in 2011, at $2.40 in August, and then $2.20 in November. Today’s lowest DRAM spot prices have only recently dipped below the $2.52 point hit in October of 2014.
The black dotted line in the chart is intended to focus readers’ attention on DRAM costs, which decrease at a 30% average Continue reading
Today’s low spot price of $4.30/GB puts us on a par with February 2013, a full two years ago (see chart). DRAM makers have done a lot to reduce their production costs since that time, so their margins this quarter will be much better than they were in the first quarter of 2013.
But we are still a very long way from the bottom of the last market downturn. In late 2012 spot prices reached a low of $2.52/GB, a full 41% lower than today’s lowest spot prices.
The Memory Guy models the production costs of leading memory chips, and DRAM manufacturing costs have been decreasing for the past several years at an average annual rate of about 30%. That means that costs today are about half of what they were two years ago, and one third of their level this time in 2012.
So even though today’s Continue reading
The Semiconductor Industry Association this week announced the year-end World Semiconductor Trade Statistics (WSTS) revenues for 2014. Worldwide sales grew 9.9% to reach a record total of $335.8 billion, outperforming the WSTS fall forecast. Annual sales increased in all four regional markets for the first time since 2010. Memory was the fastest growing segment, increasing 18.2%, partly based on DRAM growth of 34.7%.It’s encouraging that all geographical areas experienced growth. This implies that the world economy is finally on the mend.
The industry’s 9.9% worldwide growth was a good bit lower than Objective Analysis’ December 2013 prediction of growth in excess of 20%. We admit that we overshot, expecting both higher bit growth and stronger pricing in DRAM and NAND flash than actually materialized.
The $335.8 billion number is really Continue reading
The SIA yesterday released the WSTS semiconductor sales data for September. Monthly revenues reached a record $27 billion driving third-quarter revenues to their own record of $81 billion. This was the seventh straight month of semiconductor growth, the first such run-up since 2010.
This quote, by SIA CEO Brian Toohey really caught The Memory Guy’s eye: “Sales of memory products have increased sharply compared to last year and continue to be a major driver of industry growth.”
Readers may recall that Toshiba stated last July that it would immediately cut NAND flash production by 30%. At the time NAND was selling below cost for spot prices as low as 31 cents/GB.
The Memory Guy questioned both the wisdom of the move and its authenticity in a blog post at that time, since this level of cut would reduce Toshiba’s market share while increasing its Continue reading
What is going on, and how is it likely to play out? The prices in the chart represent the lowest spot market prices reported by market tracker InSpectrum for the past year. These prices typically remain below contract prices as long as there is an oversupply, and stay above contract prices during a shortage.
According to InSpectrum’s figures, today’s lowest spot market DRAM prices are about double Continue reading
DRAM manufacturers often refer to “The Windows Bump” – a phenomenon that is believed to occur after every release of a new version of the Windows operating system. According to this theory DRAM demand increases for a period following an introduction.
An example: in a recent article Kingston VP Scott Chen said that an increase in sales for Windows 8 might help raise DRAM demand, leading to more stable prices.
Demand is expected to pick up on the upcoming launch of Windows 8 tablets and Ultrabook PCs later in the second half of 2012.
Last January at the Storage Visions Conference in Las Vegas (held every year just prior to CES) I asked the audience what they would do when NAND flash reached a price of 35¢ per gigabyte. My projection (the dotted red line on the chart at left) was that prices would reach that level by the end of the year.
My audience was shocked to hear such a low price!
Price declines open up new markets. It was time to think creatively, I said, because that’s where pricing would be by the end of 2012.
Well, I was wrong – according to Continue reading
It seems that DRAM makers are still unaware of the impact NAND flash will have on DRAM revenues. Even though many are paying a lot of attention to the impact of the Tablet PC on Notebook PC shipments, few understand that even a healthy notebook market will start to place a decreasing focus on the system DRAM in the near future.
The reason why is simple, and it’s explained in great detail in a report: How PC NAND will Undermine DRAM. In a nutshell, once a basic minimum DRAM requirement has been met, NAND flash yields a greater performance return per dollar than does DRAM. This is illustrated in the graphic to the left.
Forget about the fact that NAND flash is nonvolatile, and that it offers Continue reading
Over lunch today I had a conversation with an alum of McKinsey Consulting who remarked that the DRAM business behaved in a way that was similar to the McKinsey Steel Model. For those unfamiliar with this model I found a slideshow HERE that refers to it a good deal. (So far I have not found a tutorial on the model itself, but if anyone knows were to find it The Memory Guy would highly appreciate hearing about it.)
One interesting thing is that this particular McKinsey alum was not the first to point this out to me. About 15 years ago a family friend/McKinsey alum told me exactly the same thing. It seems that the economics of the DRAM business have changed little over the past 15 years, and the McKinsey steel model applies to DRAMs just as well now as it did then.
In a nutshell, the model posits that the market price for Continue reading