Semiconductor Price Decline Worsens Outlook, Market Sentiment Plummets

[Asia Economy Reporter Changhwan Lee] The domestic semiconductor market atmosphere is freezing as memory semiconductor prices continue to fall and the U.S. tightens sanctions on Huawei. With the resurgence of the novel coronavirus infection (COVID-19), there are forecasts that the semiconductor industry conditions will improve only after the fourth quarter.

According to market research firm DRAMeXchange on the 22nd, DDR4 8-gigabit (Gb) DRAM, mainly used in PCs, recorded its lowest price of the year at $2.53 the previous day.

The spot price of DDR4 8Gb DRAM has been declining for four consecutive months since hitting a yearly high of around $3.60 in early April. Although the sharp decline seen in June and July has stopped, prices have still fallen by more than 3% this month.

As spot prices fall, fixed prices are also expected to continue declining. The average fixed price of DDR4 8Gb DRAM in July was $3.13, down 5.4% from the previous month. DRAM fixed prices had steadily risen from January to May this year but stabilized in June and turned downward last month.

With spot prices leading fixed prices downward, fixed prices are also expected to show a slight decline this month. Since companies mainly trade DRAM at fixed prices, a drop in fixed prices negatively impacts profits.

DRAM prices remained firm until April and May due to increased server DRAM demand driven by online education and remote work amid COVID-19, which expanded non-face-to-face (untact) activities. However, as customers' inventories increased afterward, order volumes decreased, and prices weakened.

Recently, concerns have grown for Korean companies such as Samsung Electronics and SK Hynix that supply semiconductors to Huawei, as U.S. sanctions on Huawei have intensified.

On the 17th, the U.S. Department of Commerce announced that semiconductors containing U.S. technology cannot be supplied to Huawei. This effectively blocks almost all semiconductor companies worldwide from trading with Huawei.

Huawei's semiconductor purchases last year ranked third globally after Apple and Samsung Electronics, indicating its significant influence on the semiconductor industry. Samsung Electronics' semiconductor sales to Huawei account for about 3.2%, and SK Hynix's about 11.4%. Difficulty in supplying semiconductors to Huawei will thus impact their sales accordingly.

The resurgence of COVID-19 is also a burden. The untact demand caused by COVID-19 may have been a one-time event, and if consumption in front-end industries such as smartphones and home appliances declines due to COVID-19, semiconductor demand will also significantly decrease. There are forecasts that it will take considerable time for the semiconductor industry to recover.

An industry insider said, "Currently, various negative factors such as price declines, U.S.-China conflicts, and COVID-19 overlap in the semiconductor industry," adding, "There is a possibility that conditions will improve only after the fourth quarter."