Facebook and Amazon are causing a memory shortage

Demand for DRAM is soaring thanks to the explosive growth in hyperscale data centers, creating a shortage and causing prices to increase.

Facebook and Amazon are causing a memory shortage

If you’ve noticed a considerable increase in the price of memory in the last few months, you can thank (or blame) Amazon, Facebook, and Google. The explosion in growth among hyperscale data centers is great if you are a supplier of components to these companies, not so great if you are buying those same components.

According to DRAMeXchange, a division of market researcher TrendForce, the price of server DRAM will continue to rise as the supply remains tight in the first quarter of this year. The server DRAM market has seen tight supply since the third quarter of last year due to massive construction projects by the data center market, especially the hyperscale data centers, data centers that are bigger than a football field.

This has caused memory demand to soar beyond expectation, leading to price hikes. And new production capacity will not be available until the second half of the year, resulting in a tight supply and increasing prices for at least the first half of this year, according to TrendForce’s estimation.

One bright spot in the predictions is that production of 2133MHz products, the standard memory speed for server DIMMs, will be overtaken by memory with a higher clock rate (2666MHz and 2400MHz), so higher bandwidth server modules will become the mainstream products.

The impact of data center growth cannot be underestimated. A recent Deloitte Technology report projects that by the end of 2018, spending on IT as a Service for data centers, software and services will be $547 billion.

At its current pace, IT as a Service will represent more than half of IT spending by the 2021/2022 timeframe, and cloud computing continues to grow at rates much higher than IT spending as IT shifts its workloads to the cloud.

Increase in cloud computing means more hyperscale data centers

The cloud demands more capacity, and this has given rise to massive hyperscale data centers. A hyperscale data center is defined by IDC as having a minimum of 5,000 servers and covers at least 10,000 square feet in size, but often is much larger. A recent report by Synergy Research said there are nearly 400 hyperscale data centers around globe, with the majority located in the U.S. That number is expected to top 500 in the next two years.

According to John Dinsdale, chief analyst at Synergy, there are at least 69 more hyperscale data centers in various stages of planning or construction. The biggest hyperscale builders are also the biggest public cloud providers, such as Amazon, Microsoft, IBM, and Google. Each company has at least 45 facilities around the world.

And they are buying a lot of hardware. Amazon alone is estimated to have bought 250,000 servers in one quarter. How much memory went into those servers? You have to figure on a lot, since they are all virtualized.

So, with the big guys sucking up all of the supply, and supply already tight, expect prices to be a bit painful for the foreseeable future.

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