Well Prepared for Downtrend
Samsung Electronics and SK Hynix are not shocked at all by a recent drop in DRAM prices as they are already well prepared for a downtrend.
According to market research firm DRAMeXchange, the price of DDR4 8Gb DRAM products for use in PCs reached US$7.31 per unit at the end of last month, down 10.74% from a month earlier, after moving sideways for five months until September. The most recent price is close to that recorded a year ago. Likewise, the contract price of 4GB PC DRAM modules for the fourth quarter of this year stood at US$31, down 10.14% from a quarter ago.
The market research firm said that the trend is likely to continue for the rest of this year and the first quarter of 2019 due to seasonal factors. “In view of the current supply and demand situations, DRAM prices are forecast to fall by up to 20% next year,” it explained.
Samsung Electronics and SK Hynix, which are dominating the global DRAM market, do not appear significantly affected by the price decline. DRAMs for use in PCs do not constitute a large part of their DRAM sales. For example, server and mobile DRAMs respectively account for 40% and 30% of SK Hynix’s sales whereas the ratio is 18% when it comes to PC DRAMs. Last month, the average price of server DRAMs was US$1.23 per gigabit, down only 6% from a month earlier.
The semiconductor prices determined through negotiations between the two companies and their partners are expected to fall only slightly in the last quarter of this year and the first quarter of 2019. In addition, the South Korean companies are predicting that there will be another semiconductor boom in the second half of 2019, led by server and mobile DRAMs. In addition, high-capacity memory chips are increasingly in use and new markets such as triple-lens cameras and 3D sensors are growing fast these days.
“The cost competitiveness of the two Korean manufacturers is improving as their 10nm technology is becoming increasingly refined,” said an industry expert, adding, “They will be able to cope without difficulty even in the event of a slump.”
According to KTB Investment & Securities, Samsung Electronics and SK Hynix are likely to reduce their semiconductor investments to 32 trillion won and 15 trillion won next year, respectively. “They are likely to flexibly adjust their investments in the first half of 2019 to cope with market situations and their investments for next year are predicted to be concentrated in the second half, when the global demand is expected to rebound,” it said.
In the meantime, the United States Department of Commerce announced on Oct. 29 that any U.S. company must be approved by the U.S. government in order to do business with Chinese semiconductor company Fujian Jinhua Integrated Circuit (JHICC). The Commerce Department has effectively banned exports of U.S. semiconductor production equipment and software to JHICC. At present, three Chinese companies are about to initiate memory production and JHICC is one of them.
“JHICC was planning to produce 32-layer 3D NAND chips and 20nm DRAM chips from 2020, but the plan has been thwarted by the U.S.,” said NH Investment & Securities, continuing, “For South Korean semiconductor manufacturers, this means one less thing to worry about.”