(Yicai) April 24 -- A sudden and sharp decline in memory chip prices has caused recycling prices for used smartphones to slump by as much as half this month.

Recycling prices for used phones have generally dropped by around 45 percent to 50 percent in April, according to Lao Li, a veteran recycler working in Shenzhen Huaqiang North Commercial Circle, the world’s largest electronics marketplace.

With the global supply of memory tight since the second half of last year, Dynamic Random-Access Memory chips that can be removed from old phones and reused have became a scarce and valuable substitute as they cost only 40 percent to 60 percent of new ones.

In the first quarter of this year, the price of conventional DRAM soared by 90 percent to 95 percent, while the price of NAND Flash jumped by 55 percent to 60 percent. Against this backdrop, several recyclers told Yicai that a scrapped handset that cost only CNY20 (USD2.93) last year could sell for at least CNY100 (USD14.63) or even CNY200 last month.

Handsets that can be dismantled for DRAM chips have seen the steepest price declines, Li said.

The downturn is driven by a sudden fall in memory costs in the first week of this month, according to industry data. The average price of a single mainstream 16 gigabyte DDR5 chip has dropped more than 40 percent from over CNY980 in late March to around CNY550 to CNY600.

The latest market turbulence has fully exposed the vulnerability of the recycling industry for second-hand electronic devices, Li told Yicai. Profits in the sector depend heavily on upstream commodity prices, while speculation is rampant, leaving it without stable value support or the ability to withstand risk. He believes that as the market bubble gradually clears, used phone recycling prices will return to a reasonable range.

The swing in chip prices have drawn regulatory scrutiny. Earlier this week, an official with the Ministry of Industry and Information Technology said recent memory price increases had already spilled over to handsets and garnered widespread attention.

In response to the issue, the official said the ministry will promote supply-demand matching and encourage both domestic and foreign producers to raise investment and expand production capacity.

The ministry will also encourage device makers and memory chip suppliers to beef up coordination and broaden diversified supply channels. At the same time, it will cooperate with other government agencies to crack down on behavior that disrupts the market, including hoarding and speculation.

Editor: Tom Litting