The continuous surge in DRAM prices has attracted the attention of China's National Development and Reform Commission

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According to IC insights, the tight supply of memory this year has pushed up prices, and they expect DRAM sales in the fourth quarter to hit a record high.

IC Insights estimates that DRAM sales in the fourth quarter will reach $21.1 billion, a 65% jump from the same period last year and the best record ever.

For the whole year, the DRAM market is expected to grow by 74%, 61 percentage points higher than the average level from 1993 to 2017, and the strongest growth momentum since the 78% growth in 1994.

Even though prices have been rising for several consecutive quarters, it seems that there is still some distance to go before DRAM prices stabilize. According to media reports, Samsung and SK Hynix have already issued price increase notices to their customers, and DRAM prices will continue to rise by 8% in the first quarter of next year, and this situation will improve in the second half of next year, which means that DRAM prices will still be rising in the first half of the year.

Many factors have contributed to the bull market in memory this year. From the supplier perspective, the global DRAM chips are mainly controlled by Samsung, SK Hynix of South Korea and Micron of the United States, with market shares of 45.8%, 28.7% and 21.0% respectively, totaling more than 90%. These memory factories have deliberately restrained their expansion and even had some accidents, which has aggravated the supply of DRAM. Secondly, during the period of DRAM shortage, the demand for high-performance memory in data centers, mobile and gaming devices has increased significantly, resulting in a shortage of supply in the market and rising prices.

This phenomenon of endless price increases has attracted the attention of China's National Development and Reform Commission.

According to media reports, the National Development and Reform Commission has recently begun to pay attention to relevant developments in the industry and does not rule out investigating DRAM in the future to determine whether there is a possibility of monopolistic behavior.

In order to cope with this possible situation of DRAM, China has also been stepping up its DRAM layout in the past two years. For example, the Fujian Jinhua project and the Hefei Changxin project. However, as IC Insights said, the domestic DRAM industry has too many difficulties to overcome in terms of patents and technology. This has brought great challenges to the development of domestic DRAM.

In the early days, the Taiwan Industrial Technology Research Institute independently developed the "Sub-micron Process Technology Development Plan" for manufacturing DRAM. At the end of 1994, a spin-off company, World Advanced, was established with the goal of realizing Taiwan's own DRAM production technology. However, due to the ups and downs of the DRAM market, World Advanced only became profitable after it transformed into a wafer foundry. For the domestic DRAM industry, this has great reference significance.

Powerchip Chairman Huang Chongren analyzed that the depreciation of existing DRAM plants has reached a certain stage, and the cost is lower than that of new entrants. In addition to the huge investment and cost difference, new entrants also have technology and patent issues. It is difficult for the mainland to obtain direct authorization from the original technology manufacturer Micron or Korean manufacturers. Without the original manufacturer's authorization, and without stealing trade secrets, DRAM production will not be possible. The earlier lawsuit against Jinhua by Micron was due to this environment.

However, all good things must come to an end. Historical experience shows that after a substantial expansion of the memory industry, as production capacity increases significantly and prices begin to lose support, the memory industry may go downhill in the near future, and a sharp pullback cannot be ruled out.

IC Insights pointed out that based on the capital expenditure plans of Samsung and SK Hynix in the second half of the year, it can be seen that new DRAM production capacity will definitely be opened next year. Under this circumstance, it is unlikely that another major memory manufacturer Micron will not take corresponding actions.

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