Blackout at the Samsung factory should not affect DRAM prices in the first quarter of 2020

Published by

teaser

Earlier last week we reported that Samsung had a power outage at a a factory for semiconductors, the outage that lasted one minute put the plant down for over a day and brought production of DRAM and NAND flash chips to a stop.



There have been concerns about would happen in the DRAM market. However, DRAMeXchange mention the effect will not be noticeable. Although the prices of DDR4 memories in general are rising, by cyclic market movements. The power outage itself and the subsequent interruption of production at the Samsung factory did not significantly affect DRAM's global supplies for commodities, so DRAMeXchange does not expect DRAM manufacturers to increase their prices. 

-- Dram Exchange -- The consistent increase in DRAM spot prices since December and the power outage at Samsung’s Hwaseong fab on December 31, 2019 have not seriously impacted the supply side of the DRAM market. But on the demand side, memory buyers have furthered their willingness to build up inventories. Thus, TrendForce is again adjusting the 1Q20 DRAM contract price forecast from “mostly holding steady”, as previously reported, to “slightly trending upward”, indicating an earlier-than-anticipated kickoff of the cyclical upturn.

In the PC DRAM segment, although negotiations over 1Q20 contract prices are currently underway, TrendForce predicts a high probability that prices of memory products shipped to PC OEMs will trend either flat or slightly upward. To avoid the potential increase of the U.S. tariffs on Chinese imports, PC OEMs rushed the shipments of notebook PCs to the U.S. market in 4Q19. Subsequently, notebook PC shipments during 1Q20 will be weaker compared to traditional seasonality. On the other hand, PC OEMs are under pressure to raise their memory inventories because DRAM suppliers are curbing their bit output. The YoY growth of the total DRAM bit output in 2020 is still projected to be less than 13%. Hence, PC OEMs are actively preparing for a supply-driven price hike in the near future. The power outage at Samsung’s Hwaseong base has only dialed up the sense of urgency. With the aim of building up a safety stock of DRAM modules in mind, PC OEMs in 1Q20 seem to be willing to accept prices that are the same level or marginally higher compared with the previous quarter. They may concede on price if DRAM suppliers are cooperative in raising product quantity.

In the mobile DRAM segment, although consumer interest in 5G smartphones is growing in 1Q20, the supply of 5G chipsets is still quite limited. Also, smartphone makers usually dial back their demand for key components during the traditional off season. Hence, any 5G-related memory demand is not expected to be significant in the beginning of 2020. TrendForce previously forecasted a 0-5% decrease QoQ in contract prices of mobile discrete products and eMCP products for 1Q20. However, server DRAM and Graphics DRAM products are now expected to lead the general price rally, as their demand has been warming up since mid-December. As well, the recent tightening of supply in the NAND Flash market is helping to prop up prices of eMCP products. The positive sentiment in these two segments has spilled over into the mobile DRAM market. The latest forecast has therefore corrected mobile DRAM price trends from “slightly downward” to “mostly holding steady” for the period.

Samsung produces most of its specialty DRAM chips on the 20/25nm processes at its Hwaseong-based fab Line 13, which was affected by the power outage. Moreover, contracts prices of specialty DRAM chips have been the first to feel the effects of the nearly month-long price upswing in the spot market. As a result, contract prices of specialty DRAM chips could rebound sooner than initially anticipated. For this first quarter, major customers (or tier-1 clients) that procure specialty DRAM chips through quarterly lock-in deals could see prices staying on the same level as in 4Q19. However, the average supply fulfillment rate of DRAM suppliers for quarterly deals related to specialty memory products is estimated to be under 60% for 1Q20. Most customers in the specialty DRAM segment had not proactively stocked up at the end of last year, so they entered 2020 with rather low inventories. Therefore, contract prices of most specialty DRAM chips will probably begin to register monthly rises starting from the first quarter. Moreover, double-booking from buyers could cause a further drop in the supply fulfillment rate. In light of these factors, contract prices for DDR3 and DDR4 memory products are projected to register a 0-5% QoQ increase in 1Q20.

 

Img_9056

Blackout at the Samsung factory should not affect DRAM prices in the first quarter of 2020


Share this content
Twitter Facebook Reddit WhatsApp Email Print