Memory Cost Surge May Raise Domestic Handset Prices
Zhang Xia
/SOURCE : Yicai
Memory Cost Surge May Raise Domestic Handset Prices

(Yicai Global) Oct. 13 -- As memory costs spiral upward and may continue their rise till the middle of next year, domestic smartphones may go up in lockstep.

The price of memory, which finds its main applications in personal computers (PC), smartphones and enterprise servers, almost doubled in a mere half year.

A steep rise in memory prices may spur a surge in the price of these products, Industry insiders said, as Guangdong government media reported Oct. 12. In the past 12 months, prices of DRAM (Dynamic Random-Access Memory) have jumped from USD2.45 to USD5.16 -- a staggering 111 percent rise -- and DRAM prices are projected to escalate even more: by up to 40 percent before year's end, an IC Insights report shows. DRAM's common product form is in memory banks.

Three titans now monopolize the DRAM memory market. They are the South Korean Samsung Group's Samsung Electronics Co. [KRX:005930] and SK hynix Inc.

[KRX:000660] and US Micron Technology Inc. [NASDAQ:MU]. The three major firms share 94 percent of the global DRAM market.

This relative dearth of sources confers very strong bargaining power on this triumvirate. In addition to PCs, the rapid development of smartphones and enterprise servers has upped demand for memory products and DRAM production capacity cannot keep up, so the memory supply bottleneck is not expected to ease till next year.

As core hardware in handsets, China's memory products have always depended on imports. This round of memory price rises will increase domestic smartphone costs, especially those of mid- and low-end handsets, securities analysts noted, and will vitiate the industry with its savage competition and meager profits.

Current smartphone memory capacity is between 2G and 8G. The price for the same handset produced by the same maker may vary by hundreds of yuan to CNY1,000 to CNY2,000 because of differing memory capacity. Smartphone prices have lately risen by CNY100 to CNY500.

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Keywords: Memory Bank , Mobile Phone , Price