Asian Investors Concerned about Data Center Demand in 2H20
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
During recent Asia marketing meetings, many of the investors we spoke with were concerned about a slowdown in semicon supply/demand in 2H20, centered on data centers. However, we expect mobile and game console demand to offset the slowdown in server demand.
Many Asian investors concerned about data center demand in 2H20
Last week, we conducted non-face-to-face marketing for the semicon sector for investors in Asia. Many local investors are concerned about a slowdown in semicon supply/demand in 2H20. They expect the upturn in data center investment in 1H20, led by non-face-to-face demand, to slow in 2H20.
Google’s CEO and others have said that they will cut costs by reducing data center investment in 2H20, in response to sales disruptions by Covid-19. Major hyperscalers are being burdened by server DRAM prices, which surged 10% q-q in 1Q20 and 20% q-q in 2Q20. Against this backdrop, they are strongly demanding a discount in server DRAM prices from memory semicon companies.
Demand for mobile and game consoles to improve in 2H20
We explained to investors that the slowdown in demand for servers in 2H20 could be offset by a jump in demand for mobile devices, PCs, and game consoles. We delivered our view that the decline in DRAM prices in 2H20 will be minimal, and prices should rebound in 1H21.
Recently, demand for smartphones has been improving. Government subsidies in response to Covid-19 are leading to greater demand for smartphones and home appliances. Demand for Samsung Electronics’ smartphones reached a bottom in April and rebounded from May. Sales of the low-end iPhone SE, released by Apple in May, are also sound. Demand for smartphones in China, which was sluggish in May as consumers delayed their purchases ahead of the 618 Shopping Festival, is expected to rebound from June.
The release of Sony’s PS5 at yearend is also positive for the semicon industry. Memory capacity per unit is expected to stand at 16 GB for DRAM and 825 GB for NAND. Assuming 20mn units are sold annually, PS5 sales could boost 2020 global NAND demand by 4%. Of note, the PS4 sold more than 90mn units in the first five years of its launch.