The latest analysis shows a significant decline in memory chip pricing, with an expected further decrease in the third quarter. This has implications for the technology and data processing sectors. Memory chip demand is also facing challenges due to...
Troy D. Hanson
August 02, 2023
The latest analysis reveals that the outlook for memory chip pricing is continuing to soften. According to KeyBanc Capital Markets analyst John Vinh, the pricing of a standard eight gigabyte DRAM module has experienced a significant decline. In fact, there has been a 53% drop year-over-year, along with a 5.6% decrease month-over-month.
DRAM, which stands for dynamic random-access memory, is a crucial component used in both desktop computers and servers. Despite the expanding demand for AI servers, the regular data center demand has remained subdued due to a near-term cannibalization effect. Vinh emphasizes that customer procurement remains cautious due to overall macro uncertainty and the demand outlook.
Looking ahead, Vinh predicts that memory prices will likely continue to fall in the third quarter, with an expected decrease of a low-single-digit percentage. Notably, he anticipates that high levels of memory inventory will persist in the cloud computing and enterprise markets. Additionally, he highlights the lackluster recovery in China as a contributing factor to the pricing deterioration.
Overall, industry professionals must keep a close eye on the ongoing softening of memory chip pricing as it has far-reaching implications for various sectors, including technology and data processing.
The Decline in Memory Chip Demand
The demand for memory chips, which are commonly used in computers, servers, and smartphones, has been experiencing a downturn. Taiwan Semiconductor Manufacturing (TSM), one of the leading chip manufacturers, recently reported a decrease in semiconductor demand compared to their earlier projections. Several factors have contributed to this decline, including a weaker global macroeconomic environment, a disappointing economic rebound in China, and poor end-market demand for both smartphones and PCs.
The Impact on AI Servers and Applications
Another type of memory called high bandwidth memory (HBM) is utilized in AI servers and applications. However, similar to the overall chip industry, HBM constitutes a small portion of the market. Although TSMC has observed a substantial increase in AI-related interest, they have emphasized that AI only accounts for 6% of their revenue. Thus, it is insufficient to compensate for the overall drop in chip demand.
Seeking Stability in Pricing
Despite the current challenges, there is hope that memory prices will stabilize in the near future. Analysts anticipate that pricing may begin to stabilize in the third quarter due to additional production cuts within the industry. Looking towards the long term, experts maintain the belief that secular trends in areas such as 5G, data centers, and edge/endpoint devices will continue to drive memory demand.
Overall, while the memory chip industry is currently facing difficulties, there are potential signs of improvement on the horizon. As the market evolves and new technologies emerge, the demand for memory chips may regain stability and fulfill its role in powering various industries.
In the latest analysis, it is reported that Micron Technology (MU), a renowned U.S.-based memory maker, has received an Overweight rating from the industry expert. The professional copywriter has set a price target of $80 for Micron's shares.
As of early trading on Tuesday, Micron shares have experienced a 1% decline, currently standing at $70.71.