Memory pricing set to take off in 2H-2023

Yole Intelligence’s memory analyst, Mike Howard delivers today a snapshot on the memory pricing, with a special focus on DRAM. Mike invites you to dive deep into the memory market and get a comprehensive understanding of pricing evolution. Is time for an inflection point? What are the market drivers behind? What is the strategy of the leading memory companies?… Yole Intelligence invites you to discover today a picture of the memory industry, today.

This analysis is based on Yole Intelligence’s DRAM Market Monitor as well as DRAM Market Monitor, DRAM Module, NAND Market Monitor, Solid-State Drives, Memory Packaging, 16Gb DDR5 DRAM Memory from MicronMore

Yole Intelligence is a Yole Group company.

The memory markets, including both NAND and DRAM have been beaten up over the last few years. DRAM prices have fallen 57% since Q3-21 ($0.54 to $0.30 in Q1-23) while NAND prices have fallen 55% during the same period. The primary drivers behind the supply/demand imbalance (and subsequent pricing declines) were customers depleting their high levels of inventory and the excess production at suppliers (which was driven by the COVID-era surge in demand).

When price declines began to accelerate in Q3-2022, the suppliers acted. Their first step was to revise 2023 spending plans to reduce 2023-24 bit production. As prices deteriorated in the second half of 2023, suppliers further reduced their production plans for 2023; ultimately nearly all memory suppliers cut investment and reduced fab utilization. The result has been an unprecedented slowing of memory bit production growth in 2023, -9% y/y growth for DRAM (down from ~21% average over the prior 7 years) and -5% y/y growth for NAND (down from ~36% average over the prior 7 years).

Mike Howard VP of DRAM & Memory Research. Yole Intelligence
Due to the long cycle time for memory production (~6 months), the cuts that were made in 2H-2022 have only recently been realized by suppliers. Reductions made in the first half of 2023 won’t be fully felt until later this year. Although the industry is very slow to correct its trajectory, make no mistake, the trajectory has been corrected and prices are set to increase as we exit 2023 and will soar in 2024.

Inventory, however, remains a key variable in the pricing equation. Although many customers have depleted their inventories and now have relatively normal stockpiles of memory on hand, suppliers have attempted to forestall price declines over the last few quarters by building their inventories. These inventories now hang over the industry like the sword of Damocles, but it appears unlikely that the sword will cut short the pricing rally. Much of the DRAM inventory at suppliers is DDR4. Demand for DDR4 is quickly being replaced by demand for DDR5, for which inventory remains relatively low. While DDR4 inventory may persist through next year, other parts (e.g., DDR5, mobile DRAM, and graphics DRAM) will be tight and prices will increase. On the NAND side, production cuts have been much deeper than for DRAM which will enable NAND inventory to be depleted much faster, and thereby bring that market back into balance.

It has taken memory suppliers a year to get their manufacturing house in order. Today, production cuts have set up suppliers to reach a sort of market balance by year end and prices will start to climb ahead of the anticipated balance. But don’t expect suppliers to immediately increase spending and production growth.  This has been a downturn the likes of which hasn’t been seen in 15 years and will need time to replenish their coffers before pouring money back into fab conversions and greenfield wafers. As such, 2024 will be a year marked by undersupply and climbing prices. Clearly memory suppliers can’t persist while incurring massive operating losses, the coming few years will be a time for suppliers to rebuild their balance sheets and nurse the wounds incurred during this painful downturn.

About the author

Mike Howard is a member of the memory team at Yole Intelligence, part of Yole Group, as VP of DRAM & Memory Research. Mike is the primary author of the DRAM Market Monitor and is based in the US. Mike’s mission at Yole is to deliver a comprehensive understanding of the entire memory and semiconductor landscape by leading the production of market updates and Market Monitors. Mike is also deeply involved in the business development of these activities.

Prior to Yole, Mike worked at IHS and Micron Technology.

Mike holds a Master of Business Administration at The Ohio State University (Ohio, United-States), a Bachelor of Science in Chemical Engineering and a Bachelor of Arts in Finance at the University of Washington (Washington, United-States).