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During China’s Double Eleven shopping festival, most terminal product sales were flat. However, due to significant production cuts and output control by the three major memory manufacturers, including Samsung, SK Hynix, and Micron, the spot prices of memory continue to rise. Among them, NAND has seen a more pronounced increase due to severe losses.
According to the latest quotes from InSpectrum, the spot prices for DRAM have remained stable over the past week for 4Gb and 8Gb DDR4, with monthly increases of 3.03% and 1.97%, respectively.
In terms of NAND Flash spot prices, the weekly prices for 256Gb and 512Gb TLC Flash remained stable and increased by 4.12%, with monthly increases of 15.25% and 27.78%, respectively.
Regarding contract prices, TrendForce estimates that DRAM prices will increase by 3% to 8% in the fourth quarter, better than the 0% to 5% decline in the third quarter; NAND prices are expected to increase by 8% to 13% in the fourth quarter, also significantly better than the 5% to 10% decline in the third quarter.
In terms of demand outlook for the three major industries, demand for PCs and smartphones has bottomed out, and growth is expected in 2024. The demand for general servers will gradually recover, and with continued investment in AI servers by enterprises, server demand is expected to turn positive in 2024.
On the supply side, the three major memory manufacturers have reduced production, with Samsung cutting DRAM production by 30% in the fourth quarter, and SK Hynix and Micron reducing production by 20%. The reduction in NAND production is even higher, and it is expected that the three major suppliers will continue to cut production until mid-2024, focusing capital expenditures and output on more profitable products, such as high-bandwidth memory (HBM) and DDR5.
Industry insiders believe that the current rise in memory prices is mainly due to supplier production cuts. However, as demand for smartphones, PCs, and servers gradually recovers, it will help improve the supply-demand structure and inventory in the memory industry. Both spot and contract prices have entered a rising cycle, indicating a positive outlook for the future.
The Price Increase Extends from DRAM to NAND
The upward trend in memory prices began with DRAM and has now extended to NAND Flash. The combination of production cuts and demand recovery has successfully turned losses into profits. Samsung Electronics and SK Hynix are expected to see an acceleration in performance improvement.
Market research firm TrendForce stated on November 9 that Samsung Electronics is expected to see NAND prices rise by 10% to 15% in the fourth quarter of this year, with further growth of 10% to 20% expected in the first half of next year.
The actual increase in NAND prices has already begun. According to data from market research firm DRAMeXchange, as of October, the price of general 128 Gb NAND used for storage cards and USB devices has risen by 1.59%. This is the first rebound since July 2021.
Although the demand recovery is still slow, production cuts have driven price increases. Suppliers have expanded production cuts to levels below cost due to the inability to sustain loss-making sales. In fact, it has been reported that Samsung Electronics will increase NAND production cuts to 40% to 50% in the first half of next year.
SK Hynix stated in last month’s third-quarter earnings call, “NAND inventory is higher than DRAM. We will temporarily maintain a conservative NAND production approach.”
Additionally, there are signs of growth in shipments of smartphones and personal computers. According to KB Securities, smartphone and PC shipments are expected to grow by 5% next year, reaching 1.2 billion and 260 million units, respectively.
For smartphones, the expected accumulated replacement demand and the recovery of demand in the Chinese smartphone market will drive growth. As for PCs, demand for replacements is expected to arise due to the impact of the cessation of support for “Windows 10” in 2025.
Particularly, the ongoing semiconductor sanctions imposed by the United States have led Chinese mobile enterprises to increase their inventory, which is seen as a favorable factor. As they expand orders, this supports price increases.
With rising DRAM prices and NAND prices, the financial performance of Samsung Electronics and SK Hynix is expected to recover rapidly.
Despite the cumulative deficit in the semiconductor industry reaching 12.69 trillion won (9.68 billion USD) as of the third quarter of this year, Samsung Electronics is expected to see a significant recovery. Although the average forecast for this year’s operating profit consensus is 7.23 trillion won, it is expected to soar to 33.9 trillion won next year, an increase of 368.7%.
SK Hynix is also expected to see a positive turnaround in operating profit. The consensus for this year’s operating deficit is 8.43 trillion won, while next year’s expectation is a profit of 8.44 trillion won.
*Disclaimer: This article is original by the author. The content reflects the author’s personal views, and Semiconductor Industry Observation reprints it only to convey a different perspective, which does not represent Semiconductor Industry Observation’s endorsement or support of this view. If there are any objections, please contact Semiconductor Industry Observation.
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