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 annual rate following Moore’s Law. Clearly a $2.52 DRAM gigabyte lost money in 2013, but today $2.50 is a profitable price. In fact, the market has been profitable for over three years, a remarkable length of time for the commodity memory business!
DRAM’s recent 45% annual decline has not brought prices below costs, and the rate of descent pales in comparison to more typical industry price collapses like the one that appears on the left side of the chart in the middle of 2011.
This is why The Memory Guy continually refers to today’s market condition as a “Mild Oversupply”. A more typical oversupply would result in a collapse like the one in 2011. Today’s market is considerably less challenging.
This is one small example of the kind of information that Objective Analysis likes to put in front of our clients, as it brings focus away from near-term market conditions to help them to focus on more fundamental issues. Astute readers will notice that DRAM prices stayed below costs for all of 2011 and 2012 in this chart, and we fully expect to see this happen again from time to time. We have an outlook for the timing of such a collapse, but it is not something that is happening at the moment.
If your company would like to take advantage of this kind of insight we welcome an opportunity to discuss ways in which we can help. Please contact us to discuss your own company’s needs.