Upturn in Chip Orders from PC Makers
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
4Q21 server DRAM demand stronger than expected
— On Dec 1, SEC stock reached KRW74,400, up 4.3% from the previous close but still down 10.4% from KRW83,000 on Jan 4. SEC is up only 8.1% from its 2021 bottom of KRW68,800 (Oct 13) vs. SK hynix up 27.3% from its 2021 bottom; the relatively small rally should make SEC more attractive. In 4Q21, server DRAM demand from the four North American data center operators (i.e., Amazon, Microsoft, Meta, Google) seems to have been 30% stronger than initially projected thanks to (1) preemptive server investments for establishing metaverse platforms in 2022 and (2) a drop in the companies’ DRAM inventories (10-12 weeks in 3Q21→7-8 weeks in 4Q21).
Brisk chip orders from four North American data center operators
— Despite chip prices having entered a downcycle this quarter, the four data center operators are increasing memory chip orders and are maintaining high volumes. This suggests they are (1) expecting memory chip demand to increase further in 2022 and (2) preemptively stockpiling chips because chipmakers’ inventory levels are below normal levels.
Upturn in chip orders from PC makers
— Total chip orders from global PC makers (e.g., Dell, HP) have recently increased for the first time in seven months. We attribute the change to:
(1) visibility for PC demand in 2022 improving as issues regarding the component supply network (e.g., non-memory chips) subside and
(2) growing demand for high-performance corporate PCs.
Given that DRAM spot prices, which recently rebounded for the first time since July, generally act as a leading indicator for contract prices, DRAM prices are likely to bottom out in 1Q21, even if contract prices remain on a downward trajectory throughout 1H22.