Suppliers anticipate contract price hike, yet uncertain demand narrows 2Q24 DRAM price increase to 3-8%.

TrendForce's latest report on the DRAM industry reveals cautious demand outlook for the year due to unhealthy inventory levels, with suppliers targeting moderate price increases in Q2 across all DRAM categories.

Insight into current state of inventories and demand outlook
Potential for increased profitability for manufacturers with adoption of DDR5-compatible CPUs
Gradual strengthening of supply leading to moderate price increases for DDR5 in the second quarter

TrendForce, a leading market intelligence firm, has released its latest report on the DRAM industry, shedding light on the current state of inventories and demand outlook. Despite efforts by DRAM suppliers to reduce inventories, they have not yet reached healthy levels. This has led to a cautious demand outlook for the year, as suppliers continue to work on improving their situations by increasing capacity utilization rates.

One factor that may drive an increase in PC DRAM demand in the second quarter is the shift towards DDR5-compatible CPUs. As manufacturers adopt more advanced and cost-efficient production processes for DDR5, their profitability is expected to rise significantly. This anticipation of higher DRAM prices has prompted suppliers to aim for price increases in Q2, targeting a modest hike of 3-8% in PC DRAM contract prices. However, the expected emergence of AI PC demand may lead to a slight moderation in DDR5 price increases.

In the server DRAM sector, there is ongoing interest in accumulating DDR5 inventory. However, DDR5 has not penetrated the market as much as anticipated, suggesting that its demand has not fully materialized. To address this, manufacturers are ramping up DDR5 production and employing volume bundling strategies to enhance profitability. This gradual strengthening of supply is leading to a slight weakening in DDR5 price increases. On the other hand, DDR4 is experiencing less pressure to reduce prices due to capacity constraints. As a result, DDR4 contract prices are expected to rise more than those for DDR5 in the second quarter, gradually closing the price gap between the two.

The mobile DRAM market currently reflects balanced buyer inventory but lacks significant demand resurgence. This has led to a passive negotiating stance in Q2 negotiations. Manufacturers, aiming to boost profitability, have set an ambitious target for Q2 mobile DRAM contract prices to increase by 10-15% or more. However, buyers’ passive negotiating stance may temper suppliers’ aggressive pricing intentions, resulting in a more moderate price increase of 3-8% for mobile DRAM in the second quarter.

In the graphics DRAM sector, strong price increases driven by other DRAM products continue to stimulate purchasing activity. Demand for mainstream GDDR6 16 Gb specification remains high, with buyers generally accepting sellers’ price increases. There are currently no signs of prices loosening or declining. Additionally, manufacturers are shifting production capacities to the HBM domain, leading to a relatively conservative production plan for GDDR. The future sales momentum of end products will play a crucial role in sustaining this positive trend. Graphics DRAM contract prices are projected to rise by 3-8% in the second quarter to achieve price increases across all DRAM categories.

The consumer DRAM market is experiencing stable demand primarily in AI-related sectors, with selective inventory restocking in TV and networking. However, the market remains weak due to slow progress in projects within the Chinese telecom and internet sectors. Major global manufacturers have capitalized on the AI boom, significantly reducing their inventories and adopting a firm stance on price increases. In contrast, Taiwanese manufacturers are facing inventory pressures, leading to a more gradual approach to price increases. Despite ample supply in the overall market, rising prices have encouraged buyers to stock up early. As a result, the increase in consumer DRAM contract prices for the second quarter is expected to be moderate, settling at an estimated growth of 3-8%.

Overall, while there are some positive developments in the DRAM industry, such as the shift towards DDR5 and strong demand for certain products, the market still faces challenges in terms of inventory levels and demand resurgence. Suppliers are cautiously navigating these dynamics and aiming for modest price increases in order to balance profitability and market conditions.

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Technology Explained

DDR4: DDR4 is a generation of Double Data Rate (DDR) dynamic random access memory (RAM) technology. It is a type of RAM that utilizes a higher clock frequency and is more power-efficient than its predecessors. As a result, it is capable of processing data more quickly than other RAM in the computer industry. Its increased speed and power efficiency are beneficial for applications such as gaming, rendering, and machine learning. It is designed for high-performance computing and enables faster access to stored information, resulting in better overall performance for the user. Furthermore, because of its low voltage requirements it requires less power consumption, making it an attractive option for many computer systems. DDR4 is set to become the primary RAM in most computer systems as the industry transitions away from its predecessors.

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DDR5: DDR5 (Double Data Rate 5) is the next generation of memory technology for the computer industry. It is a modern day improvement on earlier DDR technologies, with faster speeds, greater bandwidth and higher capacities. DDR5 enables higher resolution, seamless gaming experiences and faster data transfer rates, making it an ideal choice for high-performance computing and 4K gaming. With its greater RAM compatibility, DDR5 provides faster buffering times and raised clock speeds, giving users an improved overall work system. DDR5 is also optimized for multi-tasking, allowing users to multitask without experiencing a significant drop in performance, increasing the productivity of digital tasks. As an ever-evolving technology, DDR5 is paving the way for the computer industry into a new and powerful era.

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GDDR6: GDDR6 stands for Graphics Double Data Rate 6th generation memory. It is a high performance memory used in graphics cards and graphics processing units (GPUs), specifically targeting gaming, AI and deep learning-related applications. GDDR6 achieves higher bandwidth than previous generations, allowing faster and smoother gaming experience for users. It is also more power efficient, resulting in lower energy consumption overall. The improved power efficiency makes it adaptable to today's needs of thinner laptops and ultra-high definition gaming laptops. Additionally, GDDR6 is used in storage solutions and advanced data center applications to help streamline large amounts of data at lightning-fast speeds.