The spread of the Wuhan coronavirus is continuing to delay a recovery of the global memory chip market. Concerns over a decline in demand attributable to the spread surpassed concerns over a decline in supply attributable to factory shutdown and semiconductor prices are falling.
According to market research firm DRAMeXchange, the DDR4 8 Gb PC DRAM spot price and the MLC 128 Gb NAND flash spot price recently fell after two months of increase. Specifically, the former fell from US$3.48 to US$3.41 on Feb. 4 and the latter fell from US$6.19 to US$6.1 on Feb. 5.
This is likely to affect contract price data scheduled to be announced late this month. Last month, the DRAM contract price rose 1.07 percent to US$2.84, showing a rise for the first time in 13 months. For reference, the price was as high as US$8.31 in September 2018. The NAND flash contract price rose 3.17 percent in January this year. These price recoveries, which need to be repeated for better market conditions, are unlikely to be repeated this month with the spot prices falling.
This is bad news for Samsung Electronics and SK Hynix, which are trying to substantially improve their performances this year. According to market research firm IHS Markit, Samsung Electronics and SK Hynix accounted for 47 percent and 27 percent of the global DRAM market in the third quarter of last year, respectively. According to DRAMeXchange, their respective NAND flash market shares were 33.5 percent and 9.6 percent in that quarter.
Early this year, it was expected that an increase in demand would lead to a market recovery based on 5G popularization and cloud computing service providers’ server investment expansion. Now, however, the market consensus is that a decline in demand in China, which represents more than half of the global total demand, will continue for a while. For the first three quarters of 2019, China accounted for 24 percent and 48 percent of Samsung Electronics’ and SK Hynix’s sales, respectively.
Hong Kong-based market research firm Counterpoint Research recently said that the spread of the virus would reduce the smartphone demand in China by 20 percent year on year in the first quarter of this year and the rate of decrease would be approximately 10 percent in the following quarter. In its latest earnings announcement, Qualcomm said that significant smartphone supply and demand uncertainties arose due to the spread and lowered the bottom of its EPS estimate by five cents. Foxconn’s manufacturing facilities in China, which supply Apple and Huawei phones, are indefinitely closed for now, adding to the concerns over demand shrinkage. Last year, Apple purchased US$36.1 billion of chips to record the biggest purchase volume in the industry and Huawei followed Apple and Samsung Electronics (US$33.4 billion) with US$20.8 billion.