AI Memory Boom Squeezes Conventional DRAM Supply, Bolstering DDR3 Prices Amid DDR4 Stalemate

The rapid shift in production towards high-demand AI memory like HBM is creating a supply shortage for conventional DRAM, such as DDR4 and DDR3.

As a result, DDR4 prices are staying high with low trading volume, and some buyers are switching to older DDR3, pushing its prices up.

Major manufacturers predict this shortage will persist, indicating that supply constraints and elevated prices for conventional DRAM are likely to continue.

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The current memory chip market is experiencing a significant supply squeeze, driven almost entirely by the explosive growth in artificial intelligence.

At the heart of this issue is HBM (High Bandwidth Memory), a specialized chip essential for training AI models. Major manufacturers like Samsung, SK hynix, and Micron are dedicating a growing portion of their production capacity to meet the insatiable demand for HBM. This strategic shift, however, comes at a cost to conventional memory like DDR4 and DDR3, which are used in everyday devices like PCs and servers.

This situation has unfolded through a clear causal chain. First, the production of all memory chips begins on large silicon discs called wafers. With an estimated 22% of total DRAM wafer capacity being allocated to HBM in 2026, there are simply fewer resources available to produce the once-mainstream DDR4 and older DDR3 chips.

Second, a critical bottleneck exists in advanced packaging. Even after chips are made on a wafer, they must be packaged. Complex AI processors require advanced packaging technologies like CoWoS, and this limited capacity is also being prioritized for AI-related products. This leaves less packaging capacity for conventional DRAM, further tightening the supply chain.

Third, this supply crunch directly impacts prices and market behavior. The price of mainstream DDR4 memory has remained high, with suppliers reluctant to sell their limited inventory, anticipating even higher prices in the future. This sentiment is reinforced by industry leaders like Samsung, who have publicly warned that the memory shortage could worsen into 2027.

Consequently, some device manufacturers, unable to secure enough DDR4 at reasonable prices, are resorting to 'spec downgrading'. They are redesigning their products to use older, more available DDR3 memory. This sudden surge in demand for what was considered a legacy product is causing DDR3 prices to strengthen, a clear signal of a market under significant stress.

HBM (High Bandwidth Memory): A high-performance memory standard used for applications requiring massive data throughput, like AI accelerators and supercomputers.
Wafer: A thin slice of semiconductor material, such as silicon, upon which microcircuits are fabricated.
CoWoS (Chip-on-Wafer-on-Substrate): An advanced packaging technology that stacks multiple chips together to increase performance and save space, crucial for high-end AI processors.