The average selling price (ASP) of DRAM chips has risen in every month this year and is now at levels last seen in October 2012, according to market research firm IC Insights. The firm expects DRAM ASPs to continue to improve in the third quarter, reaching $2.53, up 50 percent from the third quarter of last year.

IC Insights attributes the strengthening ASPs to a smaller number of players in the DRAM market and years of reduced capital spending translating into less new capacity coming on line.

According to the mid-year update to IC Insights' McClean Report, set for release at the end of July, DRAM ASPs were up 42 percent in the second quarter compared with the same period of 2012. DRAM ASPs were also up 22 percent year-over-year in the first quarter, according to the report.

In the fourth quarter, IC Insights expects the ASP of DRAM to slip back down to $2.52, which would represent a 46 percent increase over the fourth quarter of 2012, IC Insights said.

Overall, IC Insights expects DRAM ASPs to be up 40 percent in 2013 compared to 2012. Despite forecasting an 8 percent decline in DRAM shipments, the firm forecasts that the market will grow by 28 percent in 2013. The DRAM market declined by 11 percent last year and 25 percent in 2011, according to IC Insights.

IC Insights noted that there are fewer DRAM vendors now than in 2010 due to consolidation. Micron Technology is still waiting to close its deal to acquire Elpida Memory, and Taiwanese suppliers Powerchip and ProMOS have essentially exited the commodity DRAM business, IC Insights said. As a result, overall DRAM production is in the hands of fewer suppliers and thus more tightly controlled, IC Insights said.

DRAM capital expenditures have also fallen sharply in recent years. Capital spending as a percent of DRAM sales dropped from 31 percent in 2011 to 19 percent in 2012, and is forecast to decline 12 percent in 2013, IC Insights said. With little new capacity being added, the supply-demand balance is now favoring DRAM suppliers as demand is beginning to outstrip supply, the firm said.

A third factor in the increased pricing strength involves changes in the computer industry, IC Insights said. The computer industry is undergoing a major transition to mobile computing, with shipments of smartphones and tablets as shipments of traditional PCs decline, the firm noted. Most DRAM suppliers have changed their product mix to meet the needs of the growing mobile market, IC Insights said.

According to IC Insights, DRAM suppliers have scaled back their output of lower-priced commodity PC DRAM and transitioned to higher-priced, low-power, mobile DRAM.

By: DocMemory
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