Why is RAM so expensive? And where can I mortgage my first-born son to pay for some DDR4?
Published 1 month ago | Last update 3 weeks ago
A typical consumer is like, “Man DDR4 is just too costly… must be something I could do about these RAM prices...”
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In one word, the truth is supply and demand. Think about how any popular player, like Cristiano Ronaldo, gets paid so much more than a doctor who saves people’s lives on a daily basis. Sound unfair right? Well, there’s just one Ronaldo but tens of thousands of life-savers. Just like that, there are many reasons why RAM is expensive and people have to resort to mortgaging their first-born sons to pay for some more DDR4 (just joking … or am I?). But there’s a lot of factors at play, some shady practices as well. Let’s see.
The basic formula why kidneys are sold in the black market
Most people sell their kidneys (to buy RAM, of course) because those prices are too high. Even 8GBs cost so much more than what it used to be only 5 years back. Demand was low. That’s the formula.
With the surge in the demand to expand memory in USB sticks and smartphones, RAM producing factories were witnessing a revolutionary change. Slowly, they spiked the prices. To set up a new factory that manufactures and assembles working memory, you need at least a year and billions of dollars. Even if you invest that much, the plant won’t be producing working memory for at least a year. In general, I’m not being too specific here.
So instead of going for that anti-business prospect, they just devise new methods to pack more memory in the same or smaller hardware. Which is nice too, and has its own perks. But it makes the RAMs even more expensive because of more technology and R&D.
There are also many natural reasons, like fires in factories (a case happened many years back in China which disrupted the supply of RAMs starkly). Still, the biggest challenge is setting up more memory production units, which none of the big RAM-making companies are willing to take on right now.
Further, DDR3 prices are also increasing because their production is shortening. And DDR4 because the demand for those is high.
You were mentioning something shady?
Yes, I was.
It’s common knowledge that the market is influenced by controlled supply. In a nutshell, manufacturers lower the supply so that the demand increases, and then they raise the price. This is corporate greed but is also very unnoticeable. It’s unnoticeable because they do it in a very planned manner. And they also face no backlash because people cannot see any alternative. A typical consumer is like, “Man DDR4 is just too costly… must be something I could do about these RAM prices...”
Let me tell you that during the 2016-17 time period, the prices of RAM skyrocketed. But that was the time when DDR3 was no longer the standard. Still, DDR3 RAMs saw doubling of their prices on average. Here’s another fact relevant to this. DRAM demand actually dropped through 2017. Let’s say only DDR3 demand fell because DDR4 was the new standard. What explains this doubling of the price?
We might never know. To add more fuel to this fire, let me tell you that price-fixing is not alienated from the DRAM industry. The 1999-2002 time period was a terrible period when Samsung artificially increased DRAM prices. In 2005, Hynix was under the radar for a price-fixing conspiracy.
So, what’s the solution?
Well, to be honest, the spike in demand for memory has slowly become flat. Now, there’s no “surge” to speak of. The smartphone demands have flattened out and the market that drove memory demand is quite normal. So, that’s a relief.
However, the biggest solution would be setting up more units to produce memory. Maybe we need a big player, an underdog, to enter the RAM manufacturing market and all companies will be forced to set up additional units, thus driving the price down to very small levels.
The Market Share
Rest is explained by the market share. When only three companies produce the majority of RAM in the world, it’s hard to lower the prices. Demand is huge. Supply is low and under control.
Currently, Samsung, Hynix, and Micron hold more than 98% of the current DRAM market. The 2016-17 period was a huge boost to the revenue of these giants. So, whatever happens with these companies affects the entire population seeking to buy a RAM. For example, the price of DRAM wad declining steadily at the rate of 33% year-over-year. This was the 1978-2012 time period. 2012 saw the rise of phone memory so the rate of declining was 3% only. But in 2016, things just changed. There was an increase of 47% -- never-before-seen price levels for DRAM.
What’s so shocking after all?
You must know, what kind of headlines were made about the GPU prices. But you know that GPU prices are spiking for solid reasons. It’s explainable. Demand is increasing, sure, as even smartphones come with games that utilize 4-8GB of GPU, but at the same time, there’s a revolutionary technological upgrade when it comes to graphics.
When you replace an old machine, everything else is proportionate. You used to have 4GB or GPU, now you go for 16GB. You had 1 TB disk, now you have 2 TB. But those prices are relatable and proportionate. When you replace an 8GB RAM with a 16GB one, the price is more than triple in many cases, which is just not proportionate.
That’s what’s shocking. If not triple, then at least double. And in most of the cases, you’ll find that the memory is same, like 8GB DDR4, but the price has more than doubled since 2016.
Sure, whatever shady deals are breaking the consumer confidence in keeping their first-born with them instead of mortgaging them, there’s also the natural aspect. The surge in high-end smartphones literally consumed a lot of memory. The amount of memory these three big players can produce is limited. And when smartphones ate up from that pie, the prices of the rest of the pie skyrocketed.
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curse these ---memory merchants---
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