Memory prices continue to rise; unlikely to return to lows of 2013

Demand, an outage and a market shift will all conspire to keep prices high for the next few years.

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I hope you got all the memory you'll need for your PCs, because prices are on a steady rise and it has nothing to do with inflation.

A number of events are taking place in the memory space to drive up prices and it really has nothing to do with greed. Memory analyst Jim Handy has issued this warning before: memory prices are headed up and will stay there until at least 2015.

First, there was a fire at a Hynix factory two months ago, the severity of which still has not been disclosed. Hynix makes the actual chips, so this had a ripple effect throughout the memory industry, causing a shortage in DRAM inventory.

Second, the industry had cut back on manufacturing about a year ago because of excess inventory, and now the effects were being felt. So we were going to have a mild shortage anyway, and the Hynix fire made it worse.

Third, the industry is about to undergo a shift in memory. DDR4 is set to hit the market early next year, likely in servers first. DDR4 promises lower power draw but much faster speed, as high as 3Ghz, compared to the 2.13GHz top speed for DDR3. It will also support reliability and better error correction over DDR3, so it will likely start out in servers, then migrate to desktops and laptops.

But that means all of the memory makers have to retool, making huge multimillion dollar investments in precision machinery. This can be a difficult process for memory makers and might impact inventory, since companies don't know how much DDR4 is needed and how much less DDR3 they should make.

This is all backstory to the sticker shock you will get if you attempt to buy memory any time soon. As the chart below shows, one year ago a single stick of Crucial 8GB 1600Mhz DDR3 memory was $42, now it's $75. The comparison site with that chart, CamelCamelCamel.com, will show sample after sample of similar upward price slopes for all kinds of memory. It's an across-the-board thing.

It's hard to predict how this will impact tablets and smartphones, because pricing there is so nutty. There is a $50 difference between the 16GB and 32GB Samsung Galaxy S4, but you can buy a 16GB microSD for $10, while Apple charges $100 more for a 32GB iPhone over a 16GB iPhone. So pricing in final products is harder to gauge from buying the actual components.

Will they drop any time soon? Doubtful. You have a confluence of events: the Hynix fire; ever-increasing demand for memory for smartphones and tablets that are offsetting drops in PC sales; memory makers cutting back on manufacturing; and migration to DDR4. All of these could cause small bumps. Together, it's a big jolt.

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