Memory Chip Prices Explained

‘Whoever controls the microchip supply, controls part of the global industry.’ – DW’s Documentary for ‘The Global Battle Over Microchips

Memory chip prices remain elevated as demand for chips used for artificial intelligence is growing.  As a result, the World Semiconductor Trade Statistics forecasted a higher growth in sales for this commodity. The widespread use of generative AI and the improving sales of PCs and smartphones are the main catalysts of the fluctuating memory chip prices.

Why are memory chip prices fluctuating?

1. Demand Dynamics

The huge appetite for data fueled by AI, 5G rollout, and the metaverse drives demand for memory chips. Reports from leading producers in South Korea and Taiwan predict continued growth, particularly for high-performance DRAM ( dynamic random-access memory ) and NAND flash chips.

For instance, Samsung Electronics plans to raise NAND flash memory chips by 20% this year to boost its profitability after the company suffered huge losses during the last 2 years. Thus, this need from top tech companies and price increase plans from producers will contribute to the volatility of memory chip costs.

2. Supply Squeeze

Even with aggressive expansion plans, chipmakers still struggle to keep up their production. Reports highlight challenges like geopolitical tensions ( between the U.S. and China ) disrupting material supplies, rising manufacturing costs, and the complex nature of advanced chip fabrication.

Furthermore, the Chinese Xi’an plant shut down more than 50 percent of its production lines last year due to rising inventory and low demand for the last 2 years. As a result, this manufacturing break will affect the global need which influences memory chip price fluctuation.

3. Hardware and Software

Generally, memory is accessible by computer components like processors. Thus, any changes related to components will directly affect the price of memory. For example, a newly released processor requires a new type of memory.

As a result, the price of the new memory chip will likely rise while the price of the old memory will decrease. Overall, both software and hardware play a role in determining the current price of memory.

4. Market Uncertainty

Trade wars and global economic fluctuations can throw the market into chaos. Experts warn of potential disruptions or delayed supply due to tensions in the Red Sea as the war, airstrikes, and hijacking consistently trouble passing merchant vessels. Thus, exporting companies will choose a costly detour that will add logistics expenses. Overall, this initiative is another price determiner for memory chip prices.

Which variables impact the price of memory chips?

• Demand Dynamics
• Supply Squeeze
• Hardware and Software
• Market Uncertainty
• Technological Changes

Where do memory chips come from?

Memory chips silently store the data that keeps our computers, phones, and countless other devices running. But, where do these tiny chips come from?

Check the intricate journey of a memory chip, from a grain of sand to a silicon powerhouse that provides us seamless and cutting-edge technology experience.

It starts with silicon, ( the second most abundant element on Earth ). This material undergoes a specific purification process to achieve the near-flawless quality needed for chipmaking. Then, using a technique called crystal growing, a cylindrical ingot of pure silicon is formed. This ingot is sliced into wafers (thin disks that serve as the canvas for the memory chip’s circuit processing ).

The fabrication of a memory chip takes place in cleanrooms ( a controlled environment where specific measures of cleanliness are observed ). The purpose of this method is to make sure that no dust or particles will integrate into the microscopic circuits while they are etched into the wafer.

Using a process called photolithography, ( a combination of light, masks, and chemicals ) it carves the intricate circuitry into the wafer’s surface. This process involves layering and patterning photosensitive materials by selectively exposing them to ultraviolet light.

The microscopic building blocks of memory are transistors and capacitors. Transistors function as switches ( controlling the flow of electricity ). Thus, representing the binary digits (0s and 1s) that store data.

On the other hand, capacitors store the electrical charge that represents these binary digits. Billions of these tiny components are meticulously crafted and interconnected on the wafer.

Once the process is complete, the wafer is diced into individual dice (each containing a single memory chip ). Then, they are carefully packaged in a tiny plastic shell with leads for connecting to the device’s circuitry.

Before rolling out to the market, memory chips undergo rigorous testing.

Every chip is blasted with electrical signals, simulating real-world conditions while ensuring their functionality and reliability. Only those who pass these tests are deemed worthy of joining the ranks of working memory.

Presently, Taiwan is home to 92% of the production of logic semiconductors ( the most advanced ones ), with TSMC ( Taiwan Semiconductor Manufacturing Company ) as the leading producer. South Korea, China, Japan, and the U.S. follow distantly.

What is the future price of memory chips?

Experts all noted a bullish market for memory chips as production cuts by microchip giants like Samsung Electronics and SK Hynix Inc., coupled with the decreasing excess inventory will fuel the memory chip price rebound. Taiwanese firm TrendForce reported a price increase of around 18% – 23% in mobile DRAM ( used in smartphones and other devices ). Also, PC, server, and graphics DRAM will climb around 10% – 15%.

This surge stems from buyers stocking up while the commodity was at historically low contract prices which maintains the robust demand for memory chips. Overall, when the market achieves its efficient capacity expansion due to technological advancements, the estimated price for a 16GB DDR5 RAM stick will be around $60 – $70 in 2030.