On the 10th, Samsung Electronics' stock price closed at 59,500 won, up 1.54% from the previous trading day, breaking the all-time high record amid expectations of improvement in the semiconductor industry. [Image source=Yonhap News]
[Asia Economy Reporter Changhwan Lee] There is a forecast that the rebound in DRAM prices will proceed faster than expected. It is also anticipated that the earnings improvement speed of our semiconductor companies such as Samsung Electronics and SK Hynix will accelerate accordingly.
According to a recent report by market research firm DRAMeXchange on the 11th, the DRAM price increase, which was expected to begin around the second quarter, is now expected to be brought forward to the first quarter.
DRAM contract prices, which fell sharply last year, have not further declined from the $2.8 range since the end of last year. DRAMeXchange predicted that DRAM contract prices could rise by up to 5% quarter-on-quarter as early as the first quarter.
Since December last year, although the rise in DRAM spot prices and the power outage at Samsung’s factory at the end of the year did not have a significant impact on the supply side, it is analyzed that memory buyers are showing movements to increase inventory on the demand side.
It is also evaluated that PC OEM (Original Equipment Manufacturer) companies rushed shipments of notebook PCs to the U.S. market in the fourth quarter of last year to avoid the possibility of increased U.S. tariffs on Chinese imports, which will have an impact.
The report explained that PC OEM companies are actively preparing for supply-driven price increases and appear willing to accept slightly higher prices compared to the previous quarter.
In the server DRAM and graphics DRAM sectors, supply has been tight and demand has been increasing since the end of last year, so it is expected to lead the overall price rebound currently. However, in the mobile DRAM sector, supply is quite limited, but since the first quarter is traditionally an off-season, demand is not expected to increase significantly.
The domestic financial investment industry also views the semiconductor industry outlook positively. Samsung Electronics, which recently announced its fourth-quarter results last year, is evaluated to have posted better-than-expected performance thanks to the semiconductor division’s strong showing.
Samsung Securities stated, "In Samsung Electronics’ semiconductor division, NAND sales volume and prices in the fourth quarter of last year exceeded expectations, and both DRAM and NAND are expected to have generated better-than-expected profits through cost reductions."
They added, "Especially considering the improving price environment for semiconductors going forward, this quarter is judged to be the bottom of earnings. DRAM is expected to have recorded an operating profit margin of over 30%, and NAND showed strong performance in the high single digits, reflecting improved profitability compared to the past."
Yuanta Securities forecasted, "From the first quarter of this year, Samsung Electronics and SK Hynix will see full-scale earnings improvements. This is because major customers, who focused on price reductions and inventory depletion throughout 2019 under the uncertainty of the external economy, are expected to fully resume DRAM purchases, leading to a price turnaround for DRAM."
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