'Semiconductors, OLED, Phones'... IT Faces 'Corona Dark Clouds' Again

Mobile OLED Shipments Plummet
Semiconductor DRAM Prices Decline for 4 Consecutive Months
Concerns Over Prolonged COVID-19 Impact Causing Slowdown in Smartphone Sales and Major IT Industry Slump

[Asia Economy Reporter Changhwan Lee] As the novel coronavirus infection (COVID-19) continues to rage in the third quarter, the atmosphere in South Korea's core IT industries such as semiconductors, OLED, and smartphones is rapidly deteriorating. With the main industries cooling sharply, there are forecasts that the South Korean economy, which barely endured the first half of the year, could worsen further in the second half.

According to market research firm UBI Research on the 25th, global mobile OLED shipments in the second quarter stood at 87 million units, a 23.1% decrease compared to the previous year. Mobile OLED was a key export item in which South Korea held over 80% of the global market share until last year.

The decline in mobile OLED shipments is due to a significant drop in smartphone sales caused by COVID-19. This trend is expected to continue into the third quarter, leading to further reductions in mobile OLED shipments.

Taking advantage of the difficulties faced by the OLED industry due to COVID-19, Chinese latecomer companies are intensifying their pursuit. Chinese OLED manufacturers are increasing their market share by supplying mobile OLED panels at 60% of the price of the world's number one, Samsung Display.

Market research firm Display Supply Chain Consultants (DSCC) projected that Samsung Display's global market share of mobile OLED, which was 85% last year, will drop to 67% this year and further decline to 49% in 2024.

Lee Choong-hoon, CEO of UBI Research, warned, "Chinese companies are increasing their market share by supplying panels at very low prices," adding, "Samsung Display's growth, which maintained a monopoly position in the smartphone OLED market, may come to a halt."

The semiconductor market, which enjoyed a COVID-19 boom in the first half of this year, has also come to a sudden halt. According to market research firm DRAMeXchange, the price of DDR4 8-gigabit (Gb) DRAM, mainly used in PCs, hit a yearly low of $2.52 as of the previous day.

The spot price of DDR4 8Gb DRAM has been declining for four consecutive months since peaking at around $3.60 in early April. With fixed prices also falling after spot prices, the profitability of South Korean semiconductor companies in the third quarter is inevitably worsening.

DRAM showed a solid price trend until mid-second quarter due to increased server DRAM demand driven by online education and remote work amid the COVID-19 pandemic. However, as customers' inventories increased afterward, orders decreased, and prices turned bearish.

It was expected that semiconductor prices would recover in the third quarter, centered on mobile DRAM, as smartphone sales increased. However, with COVID-19 persisting, expectations for consumption improvement have significantly diminished. Experts foresee that the semiconductor market will improve at the earliest in the fourth quarter of this year or, at the latest, in the first half of next year.

Samsung Electronics' future growth engine, the foundry (semiconductor contract manufacturing) business, still has a large gap with the number one. According to market research firm TrendForce, Samsung Electronics' market share in the global foundry market in the third quarter is expected to fall by 1.4 percentage points from the previous quarter to 17.4%. Meanwhile, Taiwan's TSMC, the number one, is expected to rise by 2.5 percentage points to 53.9%.

With COVID-19 firmly holding back core IT industries, concerns about the South Korean economy are growing. The Organisation for Economic Co-operation and Development (OECD) predicted that if COVID-19 resurges, South Korea's economic growth rate could fall to -2.0% this year.

Cho Kyung-yeop, head of the Economic Research Department at the Korea Economic Research Institute, said, "Since the COVID-19 situation is still not improving, severe economic contraction in the second half is inevitable," adding, "Companies need to prepare for the prolonged COVID-19 situation and use this opportunity to restructure unprofitable businesses to flexibly respond to upcoming changes in the economic environment."