DRAM spot prices have stopped falling recently, much sooner than expected, while contract prices continue their downward trend in the second quarter, according to industry sources in China.
Industry leader Samsung Electronics has changed course and announced a reduction in output, which the sources believe is the cause of the spot price stability. Samsung has also informed distributors that it would no longer sell DRAM chips at rates lower than the current price, implying that its pricing policy may change soon, the sources said.
Memory module houses, on the other hand, believe that present market demand is insufficient to sustain a strong resurgence. Although spot prices have stopped falling earlier than expected, this may just be a temporary hold, said sources at the downstream module firms.
Furthermore, since Samsung revealed its planned production cut, numerous distributors have begun to suspend sales and have stopped offering their quotes, fearing that Samsung and other chipmakers may not be willing to sell at low prices at a loss, the sources indicated.
Samsung is looking to scale down its output for primarily standard DDR4 chips for as long as six months, the sources said. Samsung's output cut will begin to contribute to global bit growth in the second half of this year, resulting in significantly lower drops in contract market prices in the third quarter.
Samsung has given clear indicators of an impending production cut, as well as a warning about potential operating losses. DRAM prices are about to bottom out, which will encourage the market to resume hoarding, according to industry observers. However, whether prices can stop falling and begin to rise still depends on actual market demand.
DRAM contract prices fell about 20% in the first quarter and were predicted to drop another 10-15% in the second. As a result of Samsung's output cut, the actual price drop in the second quarter may slow, said the observers.
