Avril Wu, research director at DRAMeXchange, said end market demand will pick up in the third quarter, when the overall PC production volume reaches its peak and Chinese smartphone brands continue to expand their production volumes as well. At the same time, the market release of iPhone 7/7 Plus will also generate strong stock-up demand. Respectively equipped with 2GB and 3GB of memory, iPhone 7 and 7 Plus will effectively consume a large portion of the total DRAM capacity.

Furthermore, DRAM suppliers have become more reserved in their technology migration efforts. According to DRAMeXchange’s estimation, the overall bit supply growth rate after 2017 may fall below 20%, allowing DRAM prices to stabilize.

Wu added that the three major DRAM suppliers plans to shift their production capacities from PC to mobile products to meet the peak season demand in the third quarter. The output forecasts of SK Hynix’s 21nm and Micron’s 20nm production for the second half of this year have been lowered on account of yield rate issues. Suppliers have experienced bottleneck in their transitions to technologies smaller than 20nm.

The difficulty level will rise if they continue to move towards the 1X/1Y nanometer nodes, and additional bit supply growth will have only marginal effect on profitability. Consequently, suppliers have lowered their capital expenditures and slow down the pace of their technology migration. DRAMeXchange has marked down this year’s annual bit supply growth rate from 25% to 23.1%. The DRAM glut will start to moderate as suppliers are unlikely to expand their annual bit supply by 30~50% as before.

The latest price report from DRAMeXchange reveals that spot prices of DDR3 512x8 chips began to rise last week (June 6) and this uptrend has also pushed up the spot quotes for DDR4 chips this week, reflecting a general mood of optimism. As for contract prices, negotiations for the third quarter are still ongoing, but PC-OEMs have been keen to stock up. Also, supply appears to tighten slightly for some branded DDR4 products. In sum, DRAMeXchange expects contract price to stabilize during the third quarter.