Will Decline of NAND Flash Prices Lead to Drop in Those of DRAMs?

Semiconductor export prices have been trending downward amid market forecasts that semiconductor prices have already hit their peaks and begun to fall. In particular, it is increasingly likely that a fall in NAND flash prices leads to a drop in DRAM prices.

According to the Bank of Korea on August 5, the semiconductor export price index (100 in 2010 and based on the US dollar) has been on decline for the fifth consecutive month since peaking at 55.98 in January. The index fell 2 percent from January to mark 54.89 in June.

The export price index is an index for measuring fluctuations in export items’ prices. The drop in the semiconductor export price index means that there was a drop in prices of products exported by Korean semiconductor companies such as Samsung Electronics and SK Hynix.

This year, NAND flashes has suffered a significant drop in prices this year. The NAND flash export price index based on US dollars peaked at 49.75 in October last year, but remained flat until November last year but then continued to slide. The index dropped below 40 in May and fell to 37.27 in June. Compared to October of last year and June of this year, the index dropped 25.1 percent. The drop in Korean NAND flash prices is attributable to the expansion of Chinese supply.

The point is that the drop in NAND flash prices may spark off a fall in prices of DRAMs, a key export item for Korean semiconductor companies. The DRAM export price index rose for 22 consecutive months from July 2016 to May last year with a boom in the semiconductor market. However, the index peaked at 44.88 in May and remained flat while hitting 44.88 again in June. Flat DRAM prices are likely to turn for a drop beginning in July. According to the Ministry of Trade, Industry and Energy, the spot price of a DDR4 4Gb DRAM fell to US$ 3.99 in July from US$ 4.63 in March.

Semiconductor prices are showing a sign of falling, which is primarily leading to a downturn in facility investment. Domestic facility investment has been decreasing for four consecutive months from March to June. The decrease for four consecutive months was recorded for the first time in 17 years and 6 months. Experts say that a drop in imports of semiconductor equipment significantly contributed to the decrease.

In the long term, semiconductor exports themselves will decrease and may negatively impact Korea’s exports. Semiconductors account for a large portion of Korea’s exports. Semiconductors accounted for 17 percent of Korea’s exports last year but exceeded 20 percent this year.

exports will not become a major concern until the second half of this year as semiconductors are still in demand," said Kim Yong-ha, a professor at Soonchunhyang University. “Korea needs the growth of new industries such as the bio industry but for the time being, Korea will have to depend heavily on semiconductor exports only.