Rising DRAM Inventories in 2023
TrendForce reports that memory module makers have been aggressively increasing their DRAM inventories since the third quarter of 2023. As of the second quarter of 2024, inventory levels have risen to an average of 11-17 weeks. This substantial inventory buildup has occurred despite a slower-than-expected recovery in demand for consumer electronics.
Weak Consumer Electronics Demand
The consumer electronics market has not rebounded as anticipated. For example, smartphone inventories in China have reached excessive levels, while notebook purchases have been delayed due to consumer interest in new AI-powered PCs. This sustained contraction in the market has led to significant drops in the spot prices for memory products. In the second quarter, these prices fell over 30% compared to the first quarter.
Challenges in the Global Consumer Market for Memory
The memory industry is experiencing severe challenges, reflected in a notable 40% year-over-year decline in shipments through retail channels for consumer NAND flash in the second quarter of 2024. Inflation and rising interest rates have impacted consumer spending, further exacerbating the decline in shipment volumes. The ongoing increase in NAND flash wafer prices is also contributing to strained operating costs for module makers.
Future Outlook
Looking ahead to 2025, DRAM prices are expected to rise gradually each quarter. This growth will be driven by the increasing penetration of HBM3E and constrained supply due to limited new capacity. Nevertheless, the anticipated price increase may fall short of expectations if consumer demand remains weak. Even if the adoption rates of AI smartphones and AI PCs improve, a widespread upgrade cycle appears unlikely, thus potentially impacting future DRAM prices.
