Rising Memory Prices Push People to Cloud Storage

by Andy Patrizio

If you were thinking of buying some memory or an SSD, you have just missed the bottom of pricing, as both NAND flash and DRAM are headed up in price.

However, that's not the only trend in memory. IHS, formerly iSuppli, predicts that tablets and smartphones are going to need less storage as everything moves to the cloud. So the jump in prices may not be so painful in the end, if the two trends intersect.

Back in January, DRAMeXchange began to notice rising prices for DRAM. A 4GB DDR3 modules went from $17 to more than $20 in the space of a month. In February, prices went up again as much as 10% again in the space of one month.

The price hike is particularly affecting desktop PCs, notes DigiTimes, a tech publication out of Taiwan, because many DRAM memory makers are shifting their capacity to making mobile RAM and server DRAM, thus reducing the total capacity available for PC-use DRAM.

NAND flash is also rising. A 512GB OCZ Vertex 4 drive was selling for as low as $349 at Micro Center. Now it?s $399. That's because the market became so flooded and the price fell so low, many manufacturers cut back production or plans for expansion, said Ryan Chien, analyst for memory and storage at IHS.

Some manufacturers were overly optimistic with their expansion plans. There was a lot of excess supply, and pricing crashed in early 2012. So most manufacturers slowed expansion plans,? he said. Toshiba, a major flash memory maker, cancelled a whole new factory for making flash.

A lot of expansion in capacity has been delayed or even cut off and redirected for other purposes. So you see that in the pricing. That's why it's been so favorable [for manufacturers] for the last two quarters, said Chien.

So you may be ready to pass on that 64GB Galaxy S IV or iPad. Well, if the trend continues, you won't need one anyway. IHS finds that thanks to the availability of streaming services and cloud storage, users are able to get by with less local storage on their smartphones and tablets.

The average memory capacity on a smartphone is holding at 12.8GB, down from 13.2GB for the same time period in 2012, according to a sampling of handsets and tablets studied by the IHS iSuppli Teardown Analysis Service. This is in contrast to a few years back, when the average capacity surged from 4.6GB in 2011 to 13.2GB in 2012.

Chien said it's thanks to cloud storage services like Dropbox and SkyDrive and streaming services like Spotify and Pandora. People just don't need to take every video or MP3 on their smartphone any more.

Your high capacity tablets aren't dying, but beyond your first adopters, who are more likely to buy a 64GB device, you have the mainstream segment who are more satisfied with this low density loading, he said.

More and more devices are coming with cloud services and streaming services, eliminating the need for excessive storage. This makes the devices cheaper. The 7-inch Kindle Fire, Barnes & Noble Nook and iPad Mini have all taken off because of their small form factors and low memory capacity, which is augmented by cloud storage.

And with the volatility of the DRAM market, device manufacturers like the stability of storage and streaming. This has also given them a reason to say I don't want to be subject to the vagaries of these DRAM manufacturers. It's tough to hedge potential market swings in memory supply and definitely encourages the tablet makers to say we'll take this into our own hands and make storage independent of the memory suppliers, said Chien.