The dawn of semiconductors, Samsung raises prices!

After a long downturn in the industry, the global chip market is finally experiencing a moment of recovery.

According to industry sources cited by the media on Tuesday, Samsung Electronics has recently signed storage chip supply agreements with Xiaomi, Oppo, and Google, among others, at prices 10-20% higher than existing contracts for DRAM (dynamic random-access memory) and NAND flash memory chips.

Sources said that Samsung Electronics also plans to supply storage chips to its mobile business division, which produces the Galaxy series smartphones, at even higher prices.

An insider said:

As far as we know, Chinese customers have agreed to accept Samsung's request for higher chip prices because they expect smartphone sales to increase, especially in overseas markets.

Industry observers have stated that as the chip industry significantly reduces output starting from the end of 2022, the chip inventory levels of smartphone manufacturers have already decreased.

A Samsung executive said that Samsung expects the storage chip market to shift from supply-demand balance to supply shortage as early as the fourth quarter of this year.

In the DRAM market, chip prices are gradually rising, driven by the latest products such as LPDDR5X for smartphones.

Taiwanese market research firm TrendForce stated that Samsung began reducing production capacity in the second quarter and is expected to further reduce it in the third quarter. With the expected decrease in inventory, chip price increases are anticipated, which may alleviate the long-term supply-demand imbalance issue.

The firm stated that Samsung is determined to raise the prices of its latest chips, and the price hikes may continue until the fourth quarter.

In the NAND flash memory market, according to industry executives, customers are no longer reducing order volumes but are instead placing more orders.

The three major global memory manufacturers, Samsung, SK Hynix, and Micron Technology, have reduced production of DRAM, including DDR4 chips, since the fourth quarter of last year. Additionally, industry executives stated that chip manufacturers have also started reducing NAND chip production.

The bit growth rate (the key indicator for measuring chip demand) for DRAM and NAND flash memory supply may decline by more than 10% this year.

Analysts state that efforts by smartphone manufacturers to launch innovative products are also driving demand for advanced mobile chips. The chip industry expects the DRAM capacity used in smartphones to grow at a rate of at least 5% per year in the coming years.

While there are positive signals of improving demand for mobile chips, the demand for storage chips from personal computer and server manufacturers remains weak.

HP CEO Enrique Lores stated during an earnings conference call last month that memory chip prices for personal computers will remain weak for a period of time. Smartphones and servers account for approximately 35% of the memory market each, while personal computer chips account for 15-20%.

Industry executives predict that the overall storage chip market will experience a significant rebound starting from the fourth quarter. Samsung's Chief of DRAM Development Department, Hwang Sang-jun, stated during the Korea Investment Week Forum held in Seoul on Monday:

"We expect the supply and demand of the memory chip market to reach a balance in the third quarter. We will see an increase in demand in the fourth quarter, and from next year onwards, demand will outpace supply."

According to Wall Street Wisdom Research, the current downward cycle of memory chips is shorter than the previous one. With the stabilization and rebound of memory chip prices, coupled with the arrival of the peak season for stocking up, the market's demand for inventory has recovered, leading to an overall acceleration in shipments. It is predicted that the storage chip market will experience a supply and demand turning point in 23H2, and there will be a shortage of DRAM supply in 2024.

Source: Wall Street Wisdom Research