DRAM price hike? Samsung Electronics and Micron Tech are reportedly considering a price increase of 15%-20%.

DRAM price hike is expected to come, with an estimated increase of 20%.

According to media reports on January 3rd, the memory module industry has received news that major memory manufacturers such as Samsung Electronics and Micron Tech plan to raise the price of DRAM in the first quarter of 2024, with an expected increase of 15% to 20%.

Industry analysts believe that this move is mainly to improve profitability, with the focus of price increases shifting from NAND Flash to DRAM, especially DDR4 and DDR5. The upward trend in memory prices is expected to continue until the end of 2024.

Morgan Stanley predicts that Samsung will quickly increase its profit margin through the price increase of memory, and has raised its profit forecast for Samsung.

Supply bottoming out, demand rebounding

Due to the high inventory of DDR4 and the weak market price performance, it is expected that the price of DDR4 and DDR5 will be the main focus of increase in the first half of 2024. The price of DRAM in December only increased slightly by 2% to 3%, but it is still significantly lower than the 10% increase in 3D TLC NAND. As for DDR3, due to relatively stable production capacity and demand, its price increase is expected to be relatively moderate, while the price increase of NAND is still uncertain but is expected to continue.

South Korean DRAM manufacturers have reduced the production rate of DRAM for two consecutive quarters in the second half of 2023, and the wafer output in the fourth quarter has reached a trough. For example, Samsung's DRAM output in the fourth quarter was only about 70% of the first quarter of 2023, and the output of advanced processes has also gradually increased.

The storage chip industry has survived the harsh winter and is experiencing cyclical demand improvement. With the gradual recovery of demand for smartphones and servers, the supply of the DRAM market is expected to continue to be tight in 2024. Currently, upstream manufacturers are planning to raise DRAM prices, and downstream customers have started to replenish low-priced inventory and stock up.

Morgan Stanley also pointed out in a previous report:

Downstream customers have started to replenish inventory, and the order volume of Chinese smartphone OEMs in Q1 2024 will increase significantly, while computer ODM/OEMs are also building inventory. The restocking of smartphone manufacturers will lead to price increases, and inventory will return to normal levels (mobile DRAM requires 4-6 weeks, NAND requires 6-7 weeks).

From the perspective of supply and demand, after significant production cuts, the output of storage manufacturers is far below demand. With the improvement of demand, the prospects for price increases in 2024 will become clearer.

In addition, Morgan Stanley pointed out that the demand for artificial intelligence will further boost the price of storage chips. Although most AI applications are deployed in the cloud, starting from 2024, edge demand will become more common (mobile AI) and may gradually enter the smartphone upgrade cycle.

Demand is not yet stable, but memory stocks have entered an optimistic phase

However, the market demand is not yet stable, and whether the price of DRAM can rise strongly like NAND wafers still needs to be observed after the Lunar New Year market demand.

Industry insiders believe that the actual purchasing power of the market has not fully recovered, and short-term trading demand is relatively flat. It is expected that the terminal market will remain cautious in the first half of the first quarter and before the Lunar New Year. The first and second quarters will be crucial. If the export demand for major applications is smoothly connected, the prosperous situation of the memory industry will be established, and the situation of supply shortage will become inevitable. It is expected that the contract price supplied to OEM factories will fully reflect the rise of DRAM in the second quarter.

Morgan Stanley believes that as earnings per share grow faster year-on-year, memory stocks tend to perform well. They are currently in the mid-term/optimistic phase of the cycle, with a year-on-year decline in spot prices of DRAM at -16%, still far from the peak level. Leaving aside valuation, the memory chip cycle has already recovered from the low point in the first quarter of 2023 and will further improve in 2024.

Memory stocks in the US market are now much cheaper than in the previous cycle, and the memory chip industry will enter a period of accelerated cyclical growth and significant increase in demand.