The prices of PCs, smartphones, and tablets are going up, with higher component prices to blame. Shortages in DRAM, flash, batteries and displays are hitting buyers in the wallet.
Minor relief is in sight next year when prices of memory and NAND flash—which is used in SSDs—will start to gradually decline. But prices will plummet big time in 2019, predicted Jon Erensen, research director for semiconductors at Gartner.
The impact could be felt on the prices of PCs and mobile devices. But it’s too early to predict the exact impact of the projected NAND and DRAM price crashes on PCs and mobile devices, Erensen said.
If the prices drop, it may be affordable for computer users to acquire components off the shelf and build PCs at home. But the prices of pre-made devices, in the end, depend on what PC makers do with the savings resulting from cheaper component pricing.
It’s possible that prices of PC and mobile devices will head back down, which has been the general trend for more than a decade. But some companies may opt for profits rather than pass the savings on to buyers, much like Apple has done historically.
Mobile device and PC prices could also remain high, but buyers should then get more bang for the buck. For the same prices, devices will be able to pack in more memory, more storage, and higher resolution screens.
Since the middle of 2016, PC DRAM pricing has doubled, according to Gartner. A 4GB module is now US$25, increasing from $12.50 in the middle of last year. The cost-per-gigabyte on SSDs has gone up at an alarming rate with the increase in prices of NAND flash. The pricing of NAND flash and DRAM will peak in the current quarter, Gartner predicted.
Gartner’s research aligns with concerns expressed by companies like Lenovo, which has been forced to reconsider pricing of PCs with higher component prices. HP has managed to absorb costs of higher components, but the company is moving to premium-priced products as it tries to focus on profitability, and not volume, said Ron Coughlin, president of the personal systems business at the company.
So how did we get here? Supply of DRAM and NAND flash went up when vendors began packing more memory and storage in devices. Apple led the charge, adding more memory and storage to Macs, iPhones, and iPads. Other vendors like Samsung followed, and a version of the upcoming Galaxy S8+ phone will have 128GB of storage and 6GB of RAM, which matches many thin-and-light laptops.
Applications like virtual reality and gaming are prompting vendors to add more storage and RAM to devices. A stable PC market is also boosting the demand for DRAM and SSDs.
Handsets, PCs and IoT devices are also generating more data, leading to an increased demand for flash storage in servers, where cloud data is stored, Erensen said. Analytics and machine learning are also sparking a need for more memory and storage in data centers.
The boost in demand led to the eventual shortage in RAM and storage, allowing manufacturers and suppliers to charge a premium. But the high demand will ultimately prompt manufacturers to boost the capacity in factories to produce more memory and storage. Gartner is predicting that by 2019, the market will be flooded with DRAM and NAND flash, and prices will plummet.
That’s a cycle the DRAM and NAND flash suppliers go through every couple of years, which makes the markets extremely volatile. Pricing for DRAM plunged in 2011 with oversupply, a slowdown in PC demand, and the effects of the global economic downturn.
A wild card is China’s aggressive approach to the semiconductor market, which could lead to even more erratic price fluctuations, Erensen said. China in 2014 said it would spend $150 billion over the next decade to expand its semiconductor capacity. China-made flash and memory chips could flood markets worldwide, and pricing could plummet.
“They have a focus on the semiconductor market, and on a global [scale],” Erensen said.