The memory market this year has benefitted from exceptional shipments results from Chinese smartphone brands and expanding server shipments caused by growing data center demand in China. Server orders going to Taiwan-based OEMs in the second half of 2016 have increased by almost 20% on average versus the year’s first half. In response to shifting market demand, DRAM manufacturers since the second quarter have significantly raised mobile and server DRAM outputs while scaling back their PC DRAM shipments.

“Mobile DRAM is expected to make up nearly 45% of the global DRAM shipments this fourth quarter while the share of server DRAM will exceed 25%,” said Avril Wu, research director of DRAMeXchange. “PC DRAM by contrast will constitute less than 20% of the entire fourth-quarter shipments.”

On the other hand, demand for notebooks has picked up in North America this third quarter, and major brands HP and Dell have increased their respective notebook shipments by more than 8% sequentially. Contract prices of 4GB PC DRAM modules (DDR3 and DDR4) have now stabilized at US$13.5 on average as supply tightens. In the fourth quarter, DRAM makers due to profit consideration will continue to expand mobile DRAM output at the expense of PC DRAM production. DRAMeXchange thus expects rising PC DRAM prices, with the average contract price of 4GB modules (DDR3 and DDR4) increasing 15% sequentially to US$15. In sum, margins of most DRAM products will continue to improve, and the market will have a healthy equilibrium through much of 2017.

Driven by Chinese smartphone vendors and the market release of the next iPhone, the stock-up activities in the mobile DRAM market will reach peak level in the fourth quarter. Currently, fourth-quarter contract prices arranged between some major Chinese smartphone brands and DRAM suppliers are over 10% higher on average compared with their third-quarter prices. Contract prices of mobile DRAM are likely to post larger sequential increases during the fourth quarter.

Demand has started to outpace supply in the NAND Flash market during the third quarter. The stock-up demand generated by Apple and Chinese smartphone brands such as Huawei, Vivo and OPPO has been greater than anticipated and is consuming a huge part of the overall production capacity for planar (2D) NAND Flash. Also, NAND Flash manufacturers have fallen behind in their schedules for the transition to the 3D-NAND technology. As supply tightens in the third quarter, the demand for enterprise-grade SSDs and the penetration of notebook SSDs are growing rapidly. All these have caused a gap between supply and demand in the NAND Flash market during this period.

Due to OEM demand and challenges related to technology migration, major NAND Flash suppliers such as Samsung, Toshiba, SanDisk and Micron have significantly reduced their shipments to memory module makers. Facing supply shortage, module makers are forced accept price hikes from suppliers as well. Data from DRAMeXchange shows that prices of mainstream 128Gb TLC wafers rose 10% from the end of June to the second half of August.

OEM clients are fairly conservative regarding the progress that NAND Flash suppliers (excluding Samsung) will make in their 3D-NAND migrations during the fourth quarter. Supply shortage worries have already caused some clients to engage in overbooking and double booking of orders.

Based DRAMeXchange’s analysis, tight supply for NAND Flash will persist as smartphone clients continue to stock up for components. Therefore, NAND Flash prices will continue to go up in the fourth quarter, though the extent of the price increase will depend on the amount of inventories that module makers are willing to carry.