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Semiconductor Prices Forecast to Recover Starting January 2020
Earlier than Previously Expected
Semiconductor Prices Forecast to Recover Starting January 2020
  • By Kim Eun-jin
  • December 27, 2019, 14:40
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Expectations are growing that fixed transaction prices of DRAMs will begin to recover faster than expected.

Spot prices of DRAMs are maintaining an uptrend, fueling expectations that fixed transaction prices of DRAMs will begin to rise soon.

According to global semiconductor market research company DRAMeXchange on Dec. 26, the average spot price of DDR4 8 Gb products, which are mostly used for PCs, recorded $3.03, a slight rebound from the previous day. DRAM spot prices continued to rise after hitting a low of $2.73 on Dec. 5. They continue to stay in the US$3 range, exceeding the fixed transaction price of $2.81 last month.

The fixed transaction price of DRAMs at the end of last month remained at US$2.94, unchanged from the previous month, despite a drop in spot transaction prices. Market watchers forecast that the fixed transaction price will recover to the US$3 range in December, when spot prices usually rise sharply. The new DRAM fixed transaction price will be announced on Dec. 31.

Fixed transaction prices of DRAMs have continued to fall since reaching a record high of US$8.19 in September last year. When DRAM prices remained at US$2.94 in the July to September period, some analysts said that the semiconductor market had hit bottom. But DRAM prices fell further to US$2.81 in the October-November period, suggesting that the industry’s stock-out proceeded at a slower-than-expected pace.

In general, semiconductor price movements based on demand factors show a similar pattern in the third and fourth quarters of the year. Accordingly, industry experts predicted as recently as the end of last month that semiconductor prices will start to rebound in the first quarter of next year and make a full-fledged recovery in the second quarter. They also took into account the protracted U.S.-China trade dispute and Intel's CPU supply shortage, which has been negatively affecting growth in server demand. Inventory levels have been lowered, but they seemed inadequate to lead a rebound.

In mid-December, however, the situation began to change. The market environment improved following a series of favorable developments, including the easing of the U.S.-China trade dispute. Industry analysts forecast that the recovery of DRAM prices will be visible from January next year, which is earlier than previously expected.

The biggest factor that has accelerated the recovery of semiconductor prices is increased demand for server chips. New data center investments are fueling an increase in demand for DRAMs for servers. Demand for mobile DRAMs is also growing due to 5G expansion. The rise in demand has led to a rapid normalization of inventories and price hikes.

On top of that, uncertainties eased following the first partial agreement between the United States and China. Micron Technology recently said the U.S. government has allowed it to supply semiconductors to Huawei for the first time since it began to sanction the Chinese tech giant in May this year.