Server DRAM Spot Price Uptrend Halted
Market research firm DRAMeXchange reported on Sept. 17 that the DDR4 8GB server DRAM price posted US$2.99 without any significant change for three days. The spot price, which was US$2.5 to US$2.6 for the first three weeks of last month, began to rise on Aug. 24, about two weeks before the implementation of U.S. restrictions on Huawei. According to the market research firm, the recent rise has to do with Huawei’s inventory increase and the contract price for the third quarter is likely to show a 10 percent decrease.
In the meantime, another market research firm TrendForce adjusted its server DRAM price decline estimate for the fourth quarter from 10 to 15 percent to 13 to 18 percent that day, mentioning server ODMs’ excessively large inventory as the biggest reason. “It will take a couple of additional quarters for the ODMs to normalize their inventory,” it said, adding, “Clients are unlikely to increase their server DRAM orders until early next year.”
The DRAM price for the fourth quarter is predicted to be affected by the large inventory and the restrictions for blocking supply to Huawei. “Although the Chinese company aggressively procured server DRAMs for the past two weeks, the market is still in oversupply,” TrendForce analyzed.
Huawei has been a major client for both Samsung Electronics and SK Hynix. It has accounted for approximately 3 percent and 12 percent of the sales of the South Korean companies, respectively.
Especially, DRAM products represent about 80 percent of SK Hynix’s sales. In the second quarter of this year, its consolidated operating profit was 1,947.6 billion won, up 205.3 percent from a year earlier, with the server memory demand and DRAM price boosted as a result of COVID-19. However, the company’s performance is likely to deteriorate in the following period with clients consuming their stocks and the prices of DRAM products estimated to fall by up to 18 percent.
When it comes to Samsung Electronics, semiconductor represents 34 percent of the total sales and 67 percent of the total operating profit. In the second quarter, its semiconductor business unit led the entire company with 18.23 trillion won in sales and 5.43 trillion won in operating profit. The business unit is facing increasing uncertainties although the mobile and consumer electronics divisions of Samsung Electronics are expected to come up with solid business figures in the second half.