Spot market for storage struggles in the first half of 2024; price challenges loom in the second half, says TrendForce

TrendForce reports that memory module manufacturers have been aggressively adding to their DRAM inventories since Q3 2023. By Q2 2024, inventories had increased to 11-17 weeks. However, demand for consumer electronics has not recovered as expected. For example, smartphone inventories in China have reached excessive levels, and notebook purchases have been delayed as consumers wait for new AI-powered PCs, leading to further market contraction.

This has led to a weakening of spot prices for memory products used primarily in consumer electronics. In the second quarter, prices fell by over 30% compared to the first quarter. Although spot prices did not match contract prices until August, this deviation could be an indication of possible future trends in contract prices.

TrendForce reports that module manufacturers saw a significant 40% year-on-year decline in consumer NAND flash memory shipments through retail channels in Q2 2024, reflecting the major challenges in the global consumer memory market. While the memory industry is typically subject to cyclical fluctuations, the sharp decline in shipments in the first half of the year exceeded market expectations, suggesting that demand is unlikely to recover significantly in the second half of the year.

Factors such as inflation and rising interest rates have affected consumer spending and indirectly dragged down consumer memory module shipments. In addition, the ongoing price increase in NAND flash wafers has further weighed on module manufacturers' operating costs. Prices must remain attractive to stimulate demand as consumers become more cautious with their spending, limiting module manufacturers' ability to pass on increased costs and thus reducing profit margins.

TrendForce notes that it is still unclear whether AI smartphones or AI PCs will find significant applications in the coming quarter. Even if adoption rates increase due to platform promotion, a comprehensive upgrade cycle is unlikely, and thus DRAM prices may not increase significantly.

While DRAM prices are expected to increase gradually each quarter through 2025, this increase will be driven primarily by the increasing adoption of HBM3e – leading to rising average prices – as well as by constrained supply due to limited new capacity. The expected increase in DRAM prices could fall short of expectations if consumer demand remains weak.

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