Following a painful period of shortages, most electronic components are in plentiful supply right now. Typically, during periods of excess, buyers see downward movement on prices as manufacturers and distributors try to clear out inventory. Since the Covid pandemic, however, there’s nothing “typical” about the electronics supply chain.
For the most part, component prices have remained pretty firm during this now-prolonged period of excess. Prices are even going up in the memory market, which is known for its price volatility. Still, a 20-percent-or-more price hike has raised a few eyebrows.
Micron and Samsung, the dominant players in memory, have announced rolling price hikes. According to market research firm TrendForce:
- On April 9th, Taiwanese media reported that Micron had proposed price increases of more than 20 percent for its products in Q2 to most customers, with price negotiations still ongoing.
- On April 8, Western Digital confirmed a shortage of HDD and SSD and notified customers of price adjustments. Western Digital will continue to review prices and adjust them accordingly.
- Samsung Electronics plans to raise prices for server DRAM and enterprise NAND flash by 15 percent to 20 percent in Q3 due to surging demand for artificial intelligence (AI).
Since Q1, memory makers have controlled their output and increased prices, TrendForce reported. Other drivers include DRAM inventory levels; demand (including data center, AI, HBM, GDDR, DDR, LPDDR); supply with advanced nodes (D1a and D1b nodes); fab idling and the Chinese domestic market — particularly CXMT’s market share, Dr. Jeongdong Choe of TechInsights told EPSNews.
DRAM spot prices will be up and down but overall, prices will increase, Choe added. TechInsights forecasts a 9 percent increase in Q3 and 13 percent in Q4.
This sort of activity creates opportunities for smaller memory companies, according to David Bagby, president, CEO and founder of Alliance Memory. “Micron does this, saying, ‘price increase, price increase’ — this is a golden ticket for us to approach those customers. If they’re approachable. If they’ll listen.”
Electronics customers often take an opportunity to price shop when commodity prices are on the rise. But it’s hard to gain the attention of big OEMs — especially in the memory market. The DRAM giants – Micron, Samsung and SK Hynix — dominate in product designs. “[Big OEM customers] have designs, and it’s Micron or Samsung on the AVL. Do they have choices to design in another vendor? Of course they do. But the reality is, Micron really has a sole source position on thousands of customers out there,” Bagby explained.
Reasons to diversify supply
OEMs try to avoid sole-sourcing because of the risk that a single partner won’t have products when needed and they effectively control pricing. Alliance became a second source for many OEMs during the Covid pandemic when inventories ran dry. Gradual price hikes in the market mean customers don’t know what they’ll be paying for products when they book orders, Bagby pointed out.
“We talk to customers that may place an order, but they don’t know what the price is going to be,” said Bagby. “They don’t know. Samsung has obsoleted some product lines and you don’t know that there will be supply. That’s kind of the big news in the last two to three months in the memory space.”
![Alliance became a second source for many OEMs during the Covid pandemic when inventories ran dry and maintains compettive prices, said Bagby](https://epsnews.com/wp-content/uploads/2024/07/Bagby2.jpg?w=1024)
David Bagby, Alliance Memory
The overall DRAM market will benefit from an average 53 percent price increase in 2024 to reach $90.7 billion, TrendForce estimates. Revenue will reach $136.5 billion in 2025 on a 35 percent average increase.
Alliance Memory is fully stocked, Bagby said, and maintains competitive pricing. “We do have a lot of inventory, because we think that that’s our advantage over the big players,” he added. “Our lead times are essentially zero, and we like to think we have a competitive price. We’re not going to tell you in July it’s going to go up, and you know when you give us an order in October, that’s going to be the price.”
Other market dynamics seem favorable for smaller memory companies. AI server demand is driving rapid growth in HBM, DDR5, and data center SSDs, leading to tighter availability for DRAM and NAND, according to Fusion Worldwide’s Greensheet. As a result, costs across all memory and storage end markets will likely continue rising. But if customers tolerate price hikes by memory manufacturers, it will lift all suppliers’ boats.
Uncertainty around Taiwan
DRAM and NAND pricing levels will continue to see significant increases and limited availability throughout the remainder of the year, Fusion added. This trend is bolstering manufacturers’ profit outlooks. Early predictions for 2025 suggest profitability will continue to improve, potentially reaching record revenue levels if demand continues to outpace supply.
OEMs always have an opportunity to second source in an uncertain pricing environment, Bagby points out. And geopolitical tension is also a reason to diversify supply. Experts fear Taiwan will be a casualty of a U.S.-China trade war, which has seen certain exports banned and tariffs increased.
“We’re starting to hear ‘we’re a little nervous about Taiwan,’” said Bagby. “We’ve got big companies that are coming to us that would never entertain us before. They come to us and say, ‘we’re nervous. We need to cover ourselves. If Taiwan gets in trouble, then we’re in trouble. So what can you provide for us?’”
There’s also movement toward nationalized semiconductor production through various CHIPS acts and toward onshore sourcing. With the U.S. emphasis on domestic supply, Alliance is hoping customers will take advantage of its local stock in Kirkland, WA.
“And we’re not going to change die [revisions],” Bagby added. “Micron’s going A rev, B rev, C rev, as they’re shrinking it to all those fabs that the government’s letting them do. So we’ve got a lot of advantages.”
Alliance notes its design activity, measured by low-volume engineering orders through distributors, has picked up. “We’re in our 18th year of business,” Bagby concluded. “We’ve survived.”
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