dram price high reason

DRAM is a necessary component for almost every piece of digital electronics these days. DRAM has achieved a status well beyond ubiquity; it’s practically omnipresent in today’s always connected world. Despite the astounding demand for DRAM, only three companies manufacture 98% of the world’s supply of it. Let’s tell you about this detail.

DRAM is used in almost, if not, every piece of modern electronics. The average computer today is sold with at least 4GB of DRAM. Flagship smartphones and tablets are given 4GB or more. HDDs, SSDs, game consoles, USB controllers, wireless routers, and even unsuspecting devices like Bluetooth headsets and USB drives all have DRAM in them.

They say that wherever you travel in the world, polar and desert extremes aside, you’ll always be within a meter of a spider. I would wager that the same is, or soon will be, true of modern electronics, and inherently so, DRAM. Keep in mind, though, that by modern electronics I don’t mean iPhones and other contemporary flagship devices; DRAM really has been around a long time, DRAM can be found in devices well over twenty years old.

Samsung, Hynix, and Micron currently hold about 98% of the market in DRAM according to DRAMeXchange. These three companies basically are the DRAM industry. While many others are trying to get a foothold in the market, it will clearly take time to make any headway against these giants. Here in Canada, we have “The Big Three Telcos,” which are Rogers, Bell, and Telus; they too hold just shy of the whole market. As a result, Canadians experience what is often described as the worst telecom market of all developed countries.

My point being that, it doesn’t take a monopoly to monopolize a market. Our Big Three in DRAM, Samsung, Hynix, and Micron, clearly hold a combinative monopoly on the market and have evidently leveraged that power for profit, albeit illegally.

These three saw a massive doubling of their revenues from Q1 2016 to Q3 2017. In less than two years, their market revenue doubled. What’s more is that, according to IC Insights, the price per bit of DRAM declined, on average, by 33% year-over-year from 1978 to 2012 where it then continued at a decline of 3% year year-over-year up until 2016 where it saw a record-breaking increase of 47%, bringing the cost to levels that had not been seen for several years before.

Further fueling the suspiciousness of this trend is the fact that DRAM demand fell from 2016 through 2017. Despite this drop in demand, there was still enough demand to constitute growth in the market, but not enough to simply explain a two-fold increase in market revenue.

You can see here and here how the price of some Kingston RAM on Amazon doubled in price in just under a year. What makes this more troubling is that this is DDR3 RAM, which still widely used at the time, was no longer the latest standard.

You might be thinking that it’s just RAM, a small portion of the whole of the cost of a product, which maybe be true in some cases, but some types of memory saw increases that were more than doubled. Today, RAM can constitute as much as 25% of a budget-build computer with an 8GB stick costing as much as $100USD. The price of DRAM affects the bill of materials for any device manufactured with it.

Rumors are circulating, according to IC Insights, that say smartphone manufacturers are skipping adding more RAM to smartphones in this upcoming generation because the cost exceeds the value in having the additional memory. Additionally, given that the cost of DDR3 increased by obscene amounts, we can only imagine how the costs GDDR5, further exacerbating the costs of graphics cards and other high-speed specialty applications.

Surprisingly, it’s not the first time this has happened.

Samsung has already been charged with artificially increasing DRAM prices from 1999 through 2002, which they settled in 2005. Additionally, Hynix was hit with a price-fixing conspiracy the same year. Typically, companies have to maintain a favorable product cost to stay competitive in the market. But in the case of the Big DRAM Three, they have all benefited from increasing the cost of their DRAM products by an amount that is disproportionate to the (negative) growth in demand over the same period. This is counterintuitive, especially when these companies are supposed to be competing with each other.

Investopedia defines an antitrust as “price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.” This whole two-year-plus debacle appears to be a price-fixing scheme that allows the DRAM three to act in unison, or in other words, share the benefits of a monopolized market. The revenue and demand data outline a cause for concern; they raise suspicion of the Big DRAM Three taking advantage of the trust of the consumers, both end users and manufacturers alike.

Hagens Berman, US law firm, agrees with many other market specialists on the matter and has filed a class-action lawsuit against the DRAM Three. “What we’ve uncovered in the DRAM market is a classic antitrust, price-fixing scheme in which a small number of kingpin corporations hold the lion’s share of the market,” Managing Partner Berman of Hagens Berman has stated publicly on the matter. The suit’s underlying complaint is that “…Defendants made a near simultaneous decision in 2016 to restrict growth in the supply of DRAM to stop the downward pressure on prices and, indeed, to cause DRAM prices to skyrocket upward.” These are very strong accusations, but they are hard to argue with given the data presented.

If you live in the US and have purchased a smartphone, tablet, computer, etc., you can signup for the Hagens Berman lawsuit here; others may find ongoing lawsuits in their respective countries, but may have to wait until they are filed.

This is just the most current example that has come to light of how a limited number of competitors in a market is, in itself, a cause for concern. Just as with the Big Three Telcos here in Canada, the lack of competition in the marketplace can lead to a halt in progressive product offerings, or in a far worse case, antitrust price-fixing schemes as we see now with Samsung, Hynix, and Micron.

Also Read: Is The Great GPU Crisis Coming To An End?