DRAM price rises could signal turnaround for local chipmakers

The prices of dynamic random access memory (DRAM) chips show signs of rebound after a major chip glut that has loomed over the global semiconductor industry since early 2022.

Semiconductor chips are seen on a printed circuit board. [REUTERS/YONHAP]

The prices of dynamic random access memory (DRAM) chips show signs of rebound after a major chip glut that has loomed over the global semiconductor industry since early 2022. Experts forecast a turnaround for local chipmakers such as Samsung Electronics and SK hynix as chip prices rise in the fourth quarter.

The spot price of 8 gigabyte Double Data Rate 4 (DDR4) 2666 chips stood at $1.518 on Friday, according to market tracker DRAMeXchange. The price jumped 4.83 percent in a month compared to the figure which hit the record low at $1.448 on Sept. 4.

Spot price refers to the current market price at which a particular asset such as a commodity, financial instrument, or derivative product can be bought or sold for immediate delivery and settlement.

The spot price of 16-gigabyte Double Data Rate 2666 chip also hit a record low at $2.715 on Sept. 8 but climbed 3.13 percent to trade at $2.80 on Friday.

Amid the chip supply glut and sluggish demand, the spot price for DRAM chips has fallen into a decline since February 2022. Samsung and SK hynix have been slashing their chip production since late last year, which has resulted in chip inventory assets bottoming out and chip prices recovering in turn.

Contract prices for chips have also stopped falling.

The average contract price for 8 gigabyte DDR4 chips in September stood at $1.30, according to DrameXchange, the same figure as August and ending the five-month consecutive downturn since April.

Analysts project that memory chip prices will rebound from the fourth quarter.

“Inventories for DRAM chips from PC companies still remain high, enough to last for coming 10 to 16 weeks, but there is a positive change among consumer sentiment as clients accept price hikes and Samsung Electronics decided to further cut supply,” said Pak Yu-ak, an analyst at Kiwoom Securities. “That change is being reflected in a price rebound for DRAM chips, including DDR4 products, and is expected to lead to a rise in contract prices in the fourth quarter.”

With the notion that chip prices have passed an inflection point, the spotlight now turns to Samsung Electronics’ preliminary earnings report for the third quarter, scheduled to be released on Wednesday.

Samsung Electronics' Device Solution division, in charge of the company's cash cow chip business, posted an operating loss totaling nearly 9 trillion won ($6.7 billion) from the January-June period. A SK Securities' report forecasts the operating loss for its chip business will be reduced to 4.1 trillion won in the third quarter, a slight improvement compared to 4.36 trillion won operating loss in the second quarter.

“We believe that Samsung Electronics’ third quarter earnings release will be a turning point for the stock, serving as a chance for investors to recognize that the July-September period should mark an earnings bottom,” said Kim Dong-won, an analyst at KB Securities.

“Meanwhile, we see simultaneous rebounds in DRAM and NAND prices in the fourth quarter, which would mark the first time since the third quarter of 2021. Earnings for DRAM and NAND products should each turn positive from the fourth quarter of 2023 and second quarter of 2024, so the semiconductor business’s turn to black should come six months ahead of market expectations.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]