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RAM prices have plummeted by over a third in just a few months, largely due to weak demand, sparking panic in the industry. While this decline doesn’t apply to all RAM types, it’s enough to worry experts, some of whom see this as a potential economic disaster.
A Sharp Decline in Prices
In just four months, RAM prices dropped by 35.7%, according to DRAMeXchange. The price of an 8-gigabit DDR4 chip fell from $2.1 in July 2024 to $1.35. The cause? Weak demand, primarily driven by poor sales of smartphones and computers. While these devices are still selling in millions globally, there has been little to no growth in shipments by the end of 2024.
Manufacturers responded by reducing their stockpiles of components, including memory chips, which collapsed the demand for these products.
How China is Ruining Everything
Despite the expected reduction in RAM production to balance prices, the opposite has occurred. The production of DRAM modules has actually increased. This is largely due to China, where mass production of DDR4 chips has been ramped up. Local vendors have resorted to aggressive dumping practices, producing large quantities and selling them at much lower prices than their competitors to dominate the market.
This is nothing new for China. The country previously employed a similar strategy to take over the gallium and germanium market, selling these materials at bargain prices until foreign companies were forced to rely on them. Now, China is using the same tactics to flood the DRAM market with cheap chips, significantly undercutting global prices.
China’s Price War
Chinese vendors like CXMT (ChangXin Memory Technologies) are selling 8-gigabit DDR4 memory chips for just $1, half the price seen in July 2024. While China’s chipmakers have yet to catch up with South Korea in terms of advanced memory technology, they are flooding the market with outdated DDR4 chips, which still hold relevance but are far surpassed by newer DDR5 modules.
The Economic Fallout
Experts warn that if this price drop continues, the consequences for the economy could be severe. Park Yoo-ak from Kiwoom Securities predicts that DRAM prices will fall even further in the coming months, and by early 2025, the supply of DRAM will outpace demand. This could spell disaster for companies like Samsung and SK Hynix, which dominate the global memory market.
As the price of semiconductors continues to fall, the performance of these leading companies is expected to decline, potentially affecting tax revenues and overall economic growth. If this trend continues, it could lead to a “reverse multiplier effect,” where reduced investments from memory manufacturers cause a contraction in the broader economy.
A Difficult Road Ahead
The DRAM market is in for a tough period, with prices likely to keep falling through early 2025. The industry, and particularly South Korea’s economy, which is heavily reliant on Samsung and SK Hynix, could face serious challenges if the price wars waged by China continue unchecked. Policymakers will need to consider measures to stabilize the market and reduce uncertainty to prevent further economic damage.
