After a year of price plunge, memory chips will see “the first rise of the year”

While reducing production and increasing prices, the memory chip industry is emerging from the cold winter.

According to Taiwan Electronic Times, two major memory chip manufacturers, Samsung and Micron, are currently planning to increase DRAM chip prices by 15%-20% in the first quarter of 2024, starting from January. Some manufacturers in the market have received Samsung's price increase notice.

SK Hynix, another one of the "Three Storage Giants", officially announced a price increase in October last year and planned to increase the contract prices of DRAM and NAND Flash chips sold to manufacturer customers by 10%-20%.

Memory chips are mainly composed of two categories: DRAM (Dynamic Random Access Memory) and NAND Flash (Flash Memory), which are widely used in storage devices such as solid-state drives and memory sticks, such as smartphones and personal computers. Since memory chips account for more than 20% of sales in the semiconductor field all year round, their price trends are also regarded by the industry as a market benchmark.

Now that chip manufacturers have taken the lead in raising contract prices, storage equipment manufacturers such as Kingston, Western Digital, and Toshiba have correspondingly increased the cost of purchasing chips, and have to follow up on price increases. When the price increase extends from upstream to downstream, consumers need to spend more money to purchase storage equipment than last year.

Jiemian News learned that Kingston has notified domestic agents to increase the listing prices of its storage products, including memory sticks and solid-state drives. The opening price of solid-state drives (mainly NAND FLash) in the offline market on January 3 increased by 3 yuan from the previous day. It ranges from 10 yuan to 10 yuan.

The latest data from TrendForce, a semiconductor industry research organization, also shows that the prices of several DRAM memory stick product models with the most shipments on the market have increased slightly today.

The rise in the storage market at the beginning of the new year was not driven by a recovery in demand, but by a strong reversal of the production reduction plan implemented by chip factories over the past year.

In 2022, memory chip prices will see a historic drop due to oversupply. In the third and fourth quarters of that year, prices of DRAM and NAND Flash were cut in half, and revenue fell sharply by about 30% in a single quarter. Chips cannot be sold, and chip manufacturers such as Samsung have to choose to cut prices.

This linear decline trend continued for a whole year, directly bringing down the performance of chip factories. In the first three quarters of 2023, Samsung's operating profit loss was as high as 90.42%, with the semiconductor business unit being the hardest hit. SK Hynix and Micron both fell below the company's historical loss record.

After experiencing a long-term price plunge, "no longer selling chips at a loss" has become the consensus of major chip manufacturers. Samsung, Micron, and SK Hynix account for 95% of the global market share in annual shipments. Since last year, the three giants have responded to the "cold winter" by reducing production and cutting orders, waiting for market prices to rise again after customer inventories are consumed to normal levels.

A research report written by Goldman Sachs disclosed that Samsung has cut its DRAM and NAND Flash chip production by 20% to 25% in 2023. Its production reduction plan is reported to be implemented until the second quarter of this year until the chip business completely returns to breakeven. SK Hynix and Micron have also been exposed to have internally set a "break-even red line" for DRAM and NAND chip prices to stop falling and rebound, and are following up on production cuts while waiting for recovery.

According to previous estimates by Morgan Stanley, in the first quarter of 2023, the total inventory of chips held by the global semiconductor supply chain (including manufacturers, distributors and customers) is expected to be available for 258 days. If calculated based on the normal speed of chip factory production reduction and customer inventory consumption, the industry is expected to reach an inflection point from the end of 2023 to the beginning of 2024.

However, consumer electronics products such as smartphones, computers and tablets have not yet completely bottomed out, and it is difficult to accurately predict when the supply and demand balance point in the storage market will arrive. Fortunately, the industry stopped the decline by relying on chip factories to reduce production and increase prices, and the turning point has emerged. In the third quarter of last year, the manufacturer contract prices of DRAM and NAND FLASH did not change significantly. TrendForcre predicts that they will completely turn from falling to rising in the fourth quarter, and will slowly return to normal on this basis in 2024.