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Prices have dropped by almost a third from their highs during the pandemic.

Memory chip prices saw a giant rise throughout the pandemic. Now, prices have come down to levels that suggest the demand boom is likely over, according to a report in the Wall Street Journal.

The average contract price for DRAM — a major type of memory — fell by 10.6 percent during the April-to-June quarter versus the prior year. The largest drop in two years, according to TrendForce, a Taiwan-based market research firm. Prices are expected to decline even more dramatically in the months ahead.

During the COVID-19 pandemic the price of memory chips surged amid extra demand for electronic devices. The result was a historic supply shortage, leading to further price increases and happy times for the semiconductor firms that manufacture them. Last year, memory chip makers accounted for three of the industry’s top four players in terms of revenue: Samsung, SK Hynix and Micron Technology.

Chip makers are preparing for a slowdown

TrendForce’s report notes that the weakening prices of memory chips reflect a big slowdown in sales of smartphones, PCs and other devices. Because consumers are buying fewer electronics, the memory chip sector has cooled and supply levels have replenished. That means lower demand, causing prices of memory chips to decline.

In 2021 Gartner predicted that the prices for memory chips would fall, and chip makers have been preparing for that prediction to be realised. Micron, the third-largest player in memory, recently issued revenue guidance well below analysts’ estimates and said it would cut back on manufacturing expansion plans and reduce capital expenses.

There were signs that consumer demand had weakened earlier this year, and Micron’s customers — which include PC and smartphone manufacturers — were expected to start reducing their inventories of chips, said Micron Chief Executive Sanjay Mehrotra. “These inventory adjustments will really come in through the second half of this year.”