Demand surges! DRAM prices have skyrocketed by 60% this year

According to Nikkei News, the spot price of dynamic random access memory chips has risen sharply. The price of benchmark DRAM has risen by about 60% since the beginning of this year, reaching the highest level since March 2019.

Nikkei further pointed out that due to the booming development of personal computers and other consumer electronics products and the rapid recovery of automobile production, it has triggered an unexpected increase in demand for semiconductors, which is the reason for the soaring prices. The US sanctions on Chinese companies have led to tensions in the supply and demand of DRAM.

According to reports, DRAM prices are expected to continue to rise because this shortage is unlikely to be resolved in the short term.

Small and medium-sized memory card manufacturers and other manufacturers that use DRAM in small batches and maintain a small amount of inventory are the main buyers in the spot market. Spot-traded chips account for about 10% of the global market, and their prices are very sensitive to the balance of supply and demand.

As of Tuesday, the median spot price of the benchmark DDR4 SDRAM 4 Gigabit chip was about $2.68, a 60% increase from the beginning of this year. Even if production resumes after the Chinese New Year holiday ends, prices will continue to rise.

A leader of a semiconductor trading company said in a desperate tone: "If the current situation remains the status quo, then the production of printers will become impossible."

Due to the increase in work from home due to the novel coronavirus crisis, the demand for home printers is strong. However, due to the shortage of chips, it is difficult to buy storage semiconductors used in printers, especially the previous generation chips.

Printer manufacturers that use a lot of memory chips usually negotiate prices with suppliers on a quarterly or monthly basis. However, recently, the leader of a semiconductor trading company said: "They started buying them on the spot market" to make up for the procurement problems.

According to the manufacturer of HOREXS IC substrate: At present, HOREXS's DRAM substrate orders are also increasing, and the production line has more than doubled year-on-year, and the increase is still ongoing.

Due to the COVID-19 pandemic, the increase in DRAM prices reflects an unexpected imbalance between supply and demand. The demand for chips has grown beyond expectations because sales of personal computers, smart phones and consumer electronics have been increasing due to extensive work at home. In addition, since last fall, automobile production has resumed sharply.

In addition, in the trade war between the two largest economies in the world, the United States imposed an effective export ban on China's largest chip foundry SMIC. Because the ban prompted chip users to postpone new purchases from SMIC, orders flooded into Taiwan's foundries, such as TSMC, the world's largest foundry.

Since the horizontal division of the industry separates development and production, the semiconductor industry cannot substantially increase production to meet the sudden surge in demand. As a result, the shortage of logic semiconductors for computing has become severe.

It is worth mentioning that the shortage of DRAM memory chips has not seriously affected South Korean companies such as Samsung Electronics and SK Hynix because they are produced by themselves.

However, as the Japanese chip makers said, the trend of the DRAM market "changed rapidly in February" because some Taiwanese manufacturers that usually produce previous-generation commodity semiconductors began to prioritize custom chips and other high-margin products. This change occurred because TSMC has been working hard to meet the skyrocketing demand.

As a result, supply has been unable to keep up with the demand in the spot market.

Soaring spot prices have also pushed up the prices of high-volume client-side products, which consume 90% of the chips. The median OEM contract price of DDR4 SDRAM 4 Gigabit chips in February was approximately US$2.40, an increase of approximately 10% from the previous month.

A leader of a trading company dealing with memory modules said: "In the market, purchase has a higher priority than price." He said that double booking of orders is emerging.

It takes about three months to produce semiconductors. An executive of a chip trading company said that although the tight balance between supply and demand is expected to continue for some time, "due to overproduction, there may be signs of relief around June."