According to foreign media reports, Samsung Electronics, SK Hynix and Eastern Hi-Tech, as of the end of the first quarter of 2023, the total semiconductor inventory has approached 50 trillion won, setting a record for the highest inventory amount since statistics began.
The sluggish industrial market has had a significant impact on Samsung Electronics and SK Hynix, and the revenue of Samsung Electronics' storage business has declined sharply for three consecutive quarters and year-on-year; SK Hynix's revenue has also fallen sharply for three consecutive quarters quarter-on-quarter and year-on-year, and there were losses in the fourth quarter of last year and the first quarter of this year.
According to chip veterans, Samsung Electronics has notified its distributors that it will no longer sell DRAM chips at lower prices than current prices.
Samsung, as a leading memory company, if its DRAM price can stop falling, then other manufacturers are likely to follow suit, for example: the pellet quotation of China's leading companies has risen since last week. When the price of leading companies has stopped falling, there may be more manufacturers will follow suit, then the spot price may soon be able to stabilize, and the price increase is also a high probability event.
Where are memory chips located in semiconductors? The semiconductor industry includes: integrated circuits, optoelectronic devices, discrete devices, sensors and other sub-industries, among which: integrated circuits can be subdivided into memory, logic circuits, analog circuits, microprocessors and other fields according to their functions. Because memory chips are often used as the vane of the semiconductor industry, showing a strong cyclicality, the industry prosperity is greatly affected by the relationship between supply and demand, in the boom, manufacturers expand production capacity to increase income, easy to lead to oversupply, and when the prosperity declines, shrink production capacity, reduce prices to clear inventory, and eventually lead to market short supply.
Image source: Industrial Securities
Memory chips can be divided into different types according to their nature. According to whether the data can continue to be stored in the device after power failure, memory chips can be divided into: power-down volatile and power-down nonvolatile.
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Volatile memory chips mainly include: static random access memory (SRAM) and dynamic random access memory (DRAM). Chips like the Samsung price rally this time are this dynamic random access memory (DRAM).
Non-volatile memory mainly includes: programmable read-only memory (PROM), flash memory (Flash) and erasable programmable read-only registers (EPROM/EEPROM).
In so many categories, currently mainly composed of: DRAM and NAND Flash, these two occupy the main memory chip market.
According to TrendForce data, the global DRAM market size in 22Q4 is $12.155 billion, which is mainly monopolized by three giants such as Samsung and SK Hynix, with a combined market share of 95.8%.
Image source: Orient Securities
The global NAND Flash market size in 22Q4 is $10.287 billion, which is mainly monopolized by five companies, including Samsung, Kioxia, SK Hynix, Western Digital (38.32, -0.42, -1.08%) (WDC.US), with a market share of 96.9%.
Image source: Orient Securities
At present, the downstream market of the storage industry accounts for a large proportion of smartphones, servers, PCs, etc.
I believe that mobile phones, PCs, memory cards, etc. are tired of hearing, and the new increment mainly comes from: AI. Benefiting from the explosion of AI applications, the AI server market is expected to continue to expand. According to TrendForce data, AI servers will grow at a compound growth rate of 10.8% from 2022 to 2026, and annual shipments of AI servers are expected to reach about 200,000 units by 2026.
Image source: Jibang Consulting
Among them, with the growth of demand for high computing power by AI technology, HBM chips are expected to increase rapidly. According to Omida, HBM's market size was $500 million in 2019 and is expected to reach $2.5 billion by 2025.
Image source: Industrial Securities
Returning to the performance of the major giants, let's say Samsung, the protagonist this time, the revenue of Samsung's storage division in 2022Q4 was 12.14 trillion won, down 38% year-on-year and 20% month-on-month. In 2022Q4, Samsung DS division's operating profit was KRW 0.27 trillion, down 97% year-on-year and 95% month-on-month.
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For example: 2023Q1 SK hynix revenue was 5.09 trillion won, down 58% year-on-year and 34% month-on-month, of which NAND business revenue accounted for 33%, about 1.68 trillion won; DRAM business accounted for 58% of revenue, or about 2.95 trillion won. Operating profit was -3.4 trillion won and net profit was -2.59 trillion won.
Image source: Industrial Securities
At present, although SK Hynix has reduced production, Samsung Electronics also announced a production reduction in early April to promote the balance of supply and demand in the market, but because the production reduction effect has not yet been exerted, the current inventory of the two factories is still at a high level, and the imbalance between supply and demand in the market is difficult to alleviate.
Industry insiders analyzed that the conservative mentality of the supply chain has caused the price of DRAM and NAND Flash contracts to continue to fall, mainly because the uncertainty of market demand is very high, including the weakening of consumer purchasing power in Europe, the United States and other places, which indirectly affects Chinese mainland export market.
Overall, it can be seen that due to the continued sluggish downstream demand, major memory chip manufacturers have reduced capital expenditure, reduced capacity utilization, and in the future, as major storage manufacturers take the initiative to deinventory and reduce production, the relationship between supply and demand is expected to continue to improve. And this time Samsung may be one of the bottoming signals.
Source: Comprehensive from the Business Times, Zhitong Finance, etc