Global DRAM Shortage Projected to Last Until 2027
According to Lu Chao-Chun, chairman of Etron, a global DRAM shortage will last at least until the first half of 2027, given the structural supply deficit caused by stagnant production capacity and soaring demand from artificial intelligence applications.
One Root Cause Structural Supply Deficit
According to Lu Chao-Chun, the current crisis is not caused by cyclical economic problems but is a structural problem. Global DRAM manufacturers have not expanded production capacity for the past four or five years, largely due to pressure on profits that has persisted. Building new DRAM fabrication plants takes a long time, with over six years to go into mass production. Hence, any capacity increment put in place today will not make any useful impact in alleviating supply before 2027.
Our current market reveals a truly severe imbalance in the supply-demand situation. Lu described a situation where suppliers have to allocate scant goods, and no one is sure that prices are dictated by buyers.
Demand Side AI and HBM
AI applications grow so fast that demand for DRAM is directly under their influence. Lu singled out HBM as a major DRAM capacity thief, calling it a "black hole." It is purported that an HBM consume 20x excess DRAM compared to regular DRAM, sucking a lot of high-end production capacity.
That concentration on HBM has led some manufacturers to reduce investments in some mature products like DDR3 and DDR4, further dragging down the total market supply.
Market Situation and Predictions
For the DRAM market by 2026, an "overall general supply shortage" scenario is anticipated. Lu says that even small increase in output that could come with further miniaturization of the process will not be able to compensate for the increasingly demanding market conditions. This would, therefore, leave the system manufacturers with two choices:
- To sit back and accept that their component costs will be increasing.
- To downgrade their memory specification.
Just in case system manufacturers find themselves in a potential risk of supply shortages which scatters shipments, the small-sized and medium-sized ones would find the pressure severe.
The End of Undervalued Memory
Lu Chao-Chun has stated that present DRAM pricing is not a true indicator of memory worth and that memory has been "undervalued" for some time now. He said that the era of endless cheap memory is over.
According to projections, the market will in the future turn into a three-tiered structure:
- High-End Applications: Will buy memory at any price.
- Mainstream Applications: Will have to accept reasonable price increase.
- Low-End Applications: May either downgrade components or simply get out of the market.
