Unexpected Effect
It has been predicted that the demise of Samsung Electronics’ Galaxy Note 7 will temporarily drive up prices of core smartphone parts such as semiconductors, including DRAM and AMOLED displays.
According to the smartphone industry, in October Trend Force, a market survey organization, forecast that global smartphone makers such Apple and those in China will expand production in the fourth quarter of this year in order to take demand in the premium smartphone market left due to the discontinuation of the Galaxy Note 7.
Accordingly, the market survey firm forecast that the smartphone industry will undergo temporary shortages of core smartphone parts such as DRAM, NAND flash and AMOLED screens.
Trend Force predicted that the Galaxy Note 7 Incident will send down Samsung Electronics’ smartphone shipments by six million units to an originally expected 310 million units. On the other hand, Apple, the arch-rival of Samsung Electronics, was expected to increase its smartphone shipments by about three million units to 208 million units from an originally expected 205 million units.
Trend Force also predicted that Huawei will ramp up smartphone shipments to 123 million units from 119 million, while Oppo and Vivo will raise their smartphone shipments to the 147 million unit level from the 144 million units, respectively. This means that the obsolescence of the Galaxy Note 7 will reduce Samsung Electronics’ smartphone shipments somewhat, but there will be no big change in the number of shipments in terms of the overall smartphone market.
Rather, such moves of Samsung Electronics’ rivals to increase production will be able to raise prices of core parts such as mobile DRAM, NAND flash and AMOLED displays.
In the case of AMOLED displays usually used in Samsung smartphones, lately more Chinese smartphone makers such as Oppo, Vivo and Huawei are choosing to use AMOLED displays too. There is a possibility of an increase in demand for AMOLED displays will increase as Samsung Electronics is planning to increase production of current premium products such as the Galaxy S7 and Galaxy S7 Edge and budget models such as the Galaxy A and Galaxy J in order to recover losses incurred due to the halt of sales and production of the Galaxy Note 7.
In addition, there is the possibility that Samsung Electronics will raise unit prices of memories and display panels depending on market situations. In particular, Samsung Electronics accounts for 61 percent of the mobile DRAM sector, 47 percent of the DRAM sector and 36 percent of the NAND flash sector in the world semiconductor market.
This means that prices of parts may fluctuate according to the supply policy of Samsung Electronics taking the initiative in the market of parts for memory semiconductors used in smartphones. The average price of DRAM (DDR3 4GB) has been on the rise since it stood at US$1.5 in September, up 8.7 percent from August.
In addition, Samsung Display, a 100 percent affiliate of Samsung Electronics, is enjoying a monopoly of the OMOLED display market with a 95 percent market share. Therefore, by raising prices of core parts for smartphones, Samsung Electronics will be able to find a way out of the shock of the Galaxy Note 7 Incident expected to incur 7 trillion won in losses.