February Server DRAM Contract Prices Rise 6%
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
Covid-19 has triggered some delays in memory semicon equipment investment in 1H20. However, chipmakers are unlikely to reduce their investment plans for 2020. And, some delays in investment should positively impact memory chip supply/demand.
Expect some delays in equipment investment in 1H20
Covid-19 has triggered delays in memory semicon equipment investment in 1H20. In detail, equipment investment is being delayed due to overseas equipment makers’ ban on travelling to Korea and China, and disruptions to engineers’ commuting plans in China. Such developments will inevitably have some negative effects on equipment makers’ 1H20 earnings.
That said, full-year semicon investment should remain intact in 2020. We expect Samsung Electronics (SEC) to maintain its investment plans (DRAM 50K wpm, NAND 85K wpm), as should SK Hynix (DRAM 30K wpm). Accordingly, semicon equipment makers’ full-year results are likely to meet consensus.
Disrupted investment to positively impact memory demand
Meanwhile, delayed equipment investment should positively impact memory chip supply/demand. Consumers are rushing to buy memory products amid fears that supply will shrink due to investment delays, with purchases concentrating on server DRAM and PC DRAM rather than on mobile DRAM.
According to DRAMeXchange, DRAM spot prices have increased 6% since Feb 24. February server DRAM contract prices rose 6% m-m. We note that expanding data center traffic due to increased remote working and reduced participation in outdoor activities owing to the coronavirus outbreak has positively impacted server DRAM demand.