First-quarter DRAM contract prices are expected to jump 90 to 95 percent from the previous quarter. A surge in oil prices linked to conflict in the Middle East is also emerging as a new factor pushing up manufacturing costs, raising speculation the uptrend could continue into the second half.

TrendForce raised its first-quarter DRAM contract price forecast to 90 to 95 percent from an earlier estimate of 55 to 60 percent. PC DRAM is expected to rise more than 100 percent, a record high on a quarterly basis. That would be more than 7 times the 8 to 13 percent rise in the previous quarter, the fourth quarter of 2025. Server DRAM is also expected to rise more than 60 percent. NAND flash was revised up to 55 to 60 percent from 33 to 38 percent. Client SSD prices rose more than 40 percent from the previous quarter, the biggest increase among NAND products.

The underlying driver is capacity being absorbed by DDR5 due to a sharp rise in AI server demand. Growing HBM3e orders and specification upgrades have reduced capacity for commodity DRAM production, and Korean suppliers are strategically delaying price negotiations to maximise margins. TrendForce said HBM3e prices have also turned higher after it reversed a previous forecast for a decline. Short-term demand from OEMs preparing for price hikes is also increasing, creating the paradox of falling inventory levels.

A surge in oil prices is also adding new upward pressure from the cost side. After U.S. and Israeli air strikes on Iran in late February, Brent crude jumped from $66 a barrel to near $120 at one point. It has fallen on ceasefire talks, but remains more than 40 percent higher than before the outbreak of war. The International Energy Agency (IEA) assessed the sharp drop in volumes transiting the Strait of Hormuz as the largest supply disruption in history, and forecast global oil supply in March would fall by 8 million barrels per day.

The problem is that rising oil prices have a direct impact on semiconductor manufacturing costs. The industry group SEMI said large semiconductor fabs consume 100 megawatts per hour, enough to supply power to about 50,000 households. McKinsey analysed the share of electricity costs in fab operating expenses at 5 to 30 percent depending on local power rates, and said annual electricity bills for large fabs can reach as high as $25 million, about 36 billion won. Taiwan and China provide power subsidies of 30 percent and up to 70 percent, respectively, to fabs, and energy prices in Europe are 2 to 3 times higher than in the United States. That means the cost burden from higher oil prices is uneven by region.

◆Memory prices show stronger downside rigidity; second half seen as turning point

For Korean fabs, government subsidies are lower than in Taiwan and China, leaving them relatively vulnerable to rising energy costs. At the same time, this gives memory suppliers grounds to justify price increases. South Korea also has a high dependence on LNG imports, meaning rising oil prices are reflected in industrial electricity rates with a lag of 2 to 3 months, amplifying the impact. Beyond power bills, logistics costs for specialty gases and chemical materials are linked to oil prices, and upward pressure is expected across manufacturing costs.

If manufacturing costs rise in a market where prices have already surged due to a supply shortage, suppliers have no reason to cut prices. In the end, suppliers such as Samsung Electronics and SK Hynix gain even more leverage in price negotiations, while server and PC OEMs face heavier burdens from rising parts procurement costs.

TrendForce said current DRAM spot prices are above contract prices, leaving room for additional increases in the second quarter. With second-quarter price talks yet to start, markets are dominated by a wait-and-see mood, but the analysis said the chances of a downturn are low because spot prices are supporting the upper end of contract prices.

The key is how long higher oil prices last. If the shock is short-lived, the impact on costs will be limited, but if high oil prices persist, memory prices are expected to stay in a structural uptrend as power bill increases are fully reflected. An industry official said, "It is an unusual phase where demand-driven increases and cost-driven increases are acting at the same time," adding, "Demand for AI server HBM and DDR5 continues to absorb capacity for commodity DRAM production, and the burden of higher power and logistics costs from rising oil prices is also piling up, changing the cost structure itself."