Computer enthusiasts and OEMs alike have been living the dream of extremely cheap RAM modules; however, Adata CEO Simon Chen believes that the dream may be close to ending. In 2012, the DRAM manufacturers will start to cut production such that they are reducing supply and thus can charge more than they currently can (they have been producing DRAM consistently over the past couple years such that there has been more than enough supply and thus a lower cost). After the holiday season, PC OEMs will start to replenish their inventories and when they do, they will be increasing inventories to a months supply instead of a two week supply.
Chen notes that the four major manufacturers of DRAM chips including Elpida Memory, Hynix Semiconductor, Micron Technology, and Powerchip Technology have suffered from selling the chips at such reduced prices for so long. While DRAM chips produced on older manufacturing processes may still be sold below the cost of production, newer DRAM manufactured on the 30nm process "will rebound from the current bottom level to a level above cash-flow production cost."
In addition to the reduced production and newer process, the demand for DRAM in general is expected to decrease due to the rising popularity of mobile computers, Chen notes. Further, the decrease in desktop DRAM demand is balanced out by increased demand for server memory from data centers purchasing additional RAM direct from the manufacturers as the server OEMs charge a hefty premium for RAM. Due to the shake up in the industry, "many makers of DRAM modules have shifted business operation to other areas" like ruggedized memory and to producing NAND flash chips for SSDs.
Admittedly, the memory makers are walking a fine line between spinning down production and being accused of price fixing; however, the ride has been a good one for consumers for a while now and the manufacturers are likely getting tired of the razor thing profit margins. Chen’s analysis of the situation may be correct in light of that fact, the new process technology allowing for better yields combined with generally lower production while the big OEMs will be buying up more RAM for their own inventories may well spell the end of being able to impulse buy tons of DDR3 RAM! What are your thoughts on both Chen’s analysis of the price increase and the industry itself- do you think prices are likely to go up next year?