Server DRAM Price to Hit Trough in November
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Server DRAM contract prices fall 4.5% in August but within expectations
According to DRAMeXchange (Aug 31), the contract price for server DRAM (32 GB) fell 4.5% MoM in August, with that of PC DRAM (DDR4 8 GB) and NAND (128 GB) flat and down 0.9% MoM, respectively. Prices were pulled down by weak demand but within expected levels. Server DRAM contract prices continued their downtrend from July (-6.4% MoM), dropping to USD124.00, which is 14.5% higher than the historical low of USD106.00 set in December 2019.
Server DRAM price to hit trough in November
Assuming a monthly average decline of 5%, server DRAM contract prices should fall below USD110.00 in November. The price should be a trough, as North American data centers (e.g., Amazon and Microsoft) tend to restock chip inventories when chip prices swoop below it, leveling off prices. Server DRAM prices should bottom out after dropping 10-15% in 4Q20. Operators at North American data centers will then begin to restock server DRAM inventory as they did in 4Q19.
Huawei’s server DRAM orders may have more than doubled
Huawei has reinforced efforts to stockpile memory chips in response to U.S-led sanctions to be placed on it on Sep 15. The company is speculated to have more than doubled its server DRAM orders (vs. July levels) to SEC and SK hynix, allowing both chipmakers to deplete inventories.
Uncertainties over chip prices to be lifted
The KOSPI closed at 2,326.17pt on Aug 31, up 5.8% YTD. SK hynix/SEC stocks have dropped 20.2%/3.2% since the beginning of the year on uncertainties over DRAM contract prices. However, server DRAM prices, which have been affecting Semiconductor stock prices in August, are expected to bottom out at around USD110.00 in 4Q20. SK hynix stock, having dropped 20% YTD, seems to already reflect uncertainties in DRAM pricing, which suggests a sharp upturn heading into 4Q20.