Slow season effects in the third quarter of this year are expected to add pressure on memory chip-makers and prompt them to cut production in a bid to absorb the impact of falling product prices, a research report said on Wednesday.
In the report, DRAMeXchange, a research division of Taiwan-based market information advisory firm TrendForce (集邦科技), said due to a supply glut, DRAM chip prices are expected to continue to fall this month after a decline of more than 7 percent last month.
DRAMeXchange said the current market downcycle is likely to force DRAM firms to cut production.
According to DRAMeXchange, the benchmark DDR3 2-gigabit DRAM chip price for last month’s delivery fell US$0.09 or 7.69 percent from June to US$1.08.
The research unit said that in advance of the launch of Microsoft’s Windows 8 operating system, set for the fourth quarter, slowing demand for high-tech devices, in particular PCs, is expected to keep negatively impacting the DRAM business and eroding the sector’s pricing power for the third quarter.
It said even if DRAM makers adopt advanced 40-nanometer technology process in a bid to cut back costs, weakening pricing power is expected to plunge them into red.
It added that production cuts, which will lower operating costs, have become the only way DRAM makers can survive as falling product prices keep squeezing their profitability at a time when the global memorychip business has failed to find a balance between supply and demand.