DRAM Prices Fall 18% in Q4... Rebound Possible Only in Q3 Next Year
Samsung and SK Q3 Earnings Show 'Red Light'
[Asia Economy Reporter Han Yeju] As the memory chip downturn continues, warning lights have turned on for the third-quarter earnings of South Korea's two major semiconductor companies, Samsung Electronics and SK Hynix.
On the 24th, market research firm TrendForce predicted that DRAM prices will fall by 13?18% in the fourth quarter compared to the third quarter. The decline in DRAM prices in the third quarter was 10?15%, and TrendForce expects prices to drop even more sharply in the fourth quarter. TrendForce analyzed the reason as "a significant decrease in memory demand, which has increased supply chain inventory pressure."
Concerns have grown recently with analyses suggesting that the global DRAM price boom, which began in the second half of 2020, ended in June this year after two years. This indicates that the DRAM market downturn is accelerating in the third and fourth quarters of this year. According to market research firm IC Insights, global DRAM sales in June plummeted by 36% compared to the previous month. The downward trend continued in July, with sales decreasing by 21% month-over-month.
IC Insights emphasized, "The market collapse is steep and rapid, with the July DRAM market falling to half the level of May," adding, "The upward trend in the DRAM market that began in the second half of 2020 has ended in every aspect." This phenomenon has accelerated as consumers worldwide reduce spending on new electronic products such as smartphones, computers, and TVs due to soaring inflation and recession concerns.
As memory prices continue to fall, there is widespread concern that the earnings of Samsung Electronics and SK Hynix, which account for more than 70% of the global DRAM market sales, will decline starting from the third quarter.
According to financial information provider FnGuide, the consensus operating profit for Samsung Electronics in the third quarter (average forecast by securities firms) is 13.2892 trillion KRW, a 16% decrease compared to the same period last year. Just three months ago, the consensus was 17.1742 trillion KRW, but it has dropped by more than 20%.
An Omdia official stated, "Samsung, the top DRAM and NAND company, maintains its position as the strongest player in the memory market, but the price adjustment period is expected to continue from the second half of this year through the first half of next year, affecting the industry overall."
The situation is even more severe for SK Hynix, where memory semiconductors account for over 90% of its business. SK Hynix's third-quarter operating profit consensus is 2.7098 trillion KRW, a 35% decline compared to the same period last year. The consensus from three months ago was 4.772 trillion KRW, nearly halved.
Industry experts expect the market atmosphere to change by the third quarter of next year. Choi Doyeon, a researcher at Shinhan Financial Investment, predicted, "Memory inventories of finished product manufacturers will be depleted around the first quarter of next year," and "fixed transaction price increases are expected around mid-next year."
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