DRAM price increases will ease

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James Carbone – Contributing Editor

There should be ample supply of DRAM through the rest of the year as memory IC manufacturers continue to increase capacity.

Memory IC buyers can expect a 2-5 per cent increase in prices for DRAM this year as the market grows 25 per cent to $118 billion because of continued strong demand from the computer segment especially from servers used in data centers.

It will mark the second straight year of 20 per cent or more revenue growth for DRAMs. Last year the DRAM market grew 25 per cent to $94 billion, according to researcher Yole Développement, a market research firm based in Lyon, France. It was the second-best year ever for DRAM in revenue. The best year was 2018 when sales were $100 billion.

“Last year was fantastic for the DRAM industry,” said Mike Howard, vice president DRAM and memory research for Yole. “We saw prices increase for much of the year and shipments were still strong,” he said. Much of the growth was driven by strong demand for servers used in data centers. “We don’t see any signals that it’s going to slow down anytime soon,” said Howard. “We expect 2022 will be another excellent year for DRAM. We are expecting it to be a record year,” said Howard.

DRAM bit shipments will increase 20 per cent and revenue will grow 25 per cent, said Howard. About 35 per cent of bit demand is coming from data centers while PCs account for 18 per cent of bit shipments and smart phones represent about 26 per cent.

“Smart phones used to be the big driver but aren’t growing as fast as they used to,” said Howard. Smart phone shipments will be flat or increase about 1 per cent in 2022. DRAM content in smart phones is growing by about 10 per cent a year, but it is not growing at the same rate as several years ago, he said.

Capacity added
The good news for memory IC buyers is that despite strong DRAM demand, supply should not be a problem in 2022 as DRAM manufacturers have added capacity over the years and plan to increase capacity in the future.

“By and large DRAM is pretty available,” said Howard. “Things got a little tight last year but that was the normal DRAM market tightness,” said Howard. A tighter-than-normal market last year resulted in steep price increases for DRAM.

Brian Matas, vice president of market research for IC Insights, said the average DRAM price increased 23 per cent last year, rising from an average of $3.51 in 2020 to $4.30 in 2021. Despite an expected 11 per cent increase in unit shipments this year, average DRAM tags will rise only 2 per cent in 2022 to $4.39, according to Matas. Some researchers said prices could rise as much as 5 percent.

More good news: future annual price increases will be in the single digits through 2026. In fact, in 2024 the average price will decline 16 per cent. In 2026 the average DRAM price will be $4.21 which is less than the price forecast for 2022, according to IC Insights.

One reason that DRAM supply will be ample and prices increases will be modest is the DRAM industry has not had the supply chain issues that have plagued other semiconductor segments.

“A large part of that is DRAM suppliers make their own DRAM,” said Howard. Suppliers of other semiconductors often use foundries to build their chips and foundry capacity has been tight over the last several years. DRAM manufacturers routinely invest in new fabs and add capacity.

“They know what demand is going to be and they build for that demand and they are generally able to satisfy it,” he said.

New fabs planned
The three primary DRAM manufacturers—Samsung, SK Hynix and Micron—have added capacity and opened new fabs in recent years and have plans to build new fabs. For instance, SK Hynix opened a new fab last year “which will provide them with plenty of space for the next four years,” said Howard. In addition, Hynix plans to build four more fabs in the coming years.

Samsung is building another fab at its “super site” in Pyeontaek, Korea, he said. Samsung seems to continuously build new fabs to keep up with growing demand. “When they finish one fab they start building another. That’s part of their long-term plan,” said Howard.

Last fall, U.S.-based memory IC manufacturer Micron Technology, Inc. said it would invest more than $150 billion globally over the next 10 years in memory IC manufacturing and research and development (R&D) for DRAM and NAND because of expected strong demand. The company noted besides computers, there are other growth drivers for DRAM including 5G, artificial intelligence and automobiles.

“Growth drivers like 5G and AI will expand usage of DRAM and other memory ICs across the data center and the intelligent edge, and in areas like automotive and a diversity of user devices,” said Sanjay Nehrita, Micron’s president and CEO.

Transition to 5G
While DRAM manufacturers are increasing production capacity, there could be some supply issues when the transition from double data rate (DDR) 4 DRAMs to DDR5 begins in the second half of the year. “There’s a bit of concern as there is a transition to DDR5” because DDR5 will need power management ICs in modules and some PMICs are outsourced to foundries, said Howard. “There is some sensitivity to power management IC availability.”

There has been strong demand for PMICs which have had long lead times over the past several years. The industry is transitioning to DDR5 because DDR5 DRAMs are faster than DDR4, have higher memory bandwidth, higher densities and better efficiency, which are important to a range of applications including gaming, video conversion and photo editing, among others.

Howard said the transition to DDR5 will begin later in the year and by the end of 2020 about 10 per cent of all the DRAMs shipped will be DDR5.

“It will take a while for DDR5 to get to the point where it is the dominant DRAM technology,” said Howard. DDR5 will outship DDR4 by the end of next year. However, DDR4 DRAMs will continue to be produced for a while for several reasons. One is cost.

“DDR5 will be more expensive,” said Howard. With PCs, computer OEMs will make a “decision whether they are going to ship new systems with DDR4 or DDR5, he said. DDR4 will cost less and “a lot of mainstream PCs will opt for DDR4 just to keep costs under control,” Howard said.

“Initially DDR5 will be used more in servers. Intel will ship Sapphire Rapids processors in the second half year,” said Howard. Those processors will be used in servers. “That will be the first platform that supports that DDR5,” he said.

Over time, DDR5 will also be used in mainstream, lower cost PCs because of its higher bandwidth. “Typically, the way it works is once a new technology ships in higher volumes than the old technology, a price crossover occurs,” said Howard. With higher volumes, DDR5 “will become cheaper and once that happens you start to see a rush for the exits for DDR4,” he said. By 2024 most DRAM shipments will be DDR5.

DRAM demand will rise
Over the next several years, demand for DRAM, either DDR4 or DDR5, will continue to grow because of strong demand from the computer, communications and consumer segments. In addition, automotive could become a more important driver for DRAMs in the not-so-distant future as more vehicles will be equipped with Advanced Driver Assistance Systems and more electric and autonomous vehicles ship.

ADAS systems, which are being more widely designed into vehicles, require DRAM for high-definition displays and instrumentation consoles and head-up displays. DRAM is also needed to process camera and high-bandwidth input. In addition, autonomous vehicles will require DRAM to process high-bandwidth input sources.

Matas said automotive is one of its target areas through the middle of this decade for Micron. He said some electric vehicles that have Level III autonomous capabilities and they will require 140GB of DRAM.

“There won’t be many of those vehicles shipped in 2022” but it could be an important driver for DRAM in the future, he said.