Even Booming Semiconductor Spot Prices Falter, Concerns Over Industry Downturn Grow Larger

[Asia Economy Reporter Changhwan Lee] The semiconductor spot prices, which had been on the rise since the beginning of this year, have triggered warning signals. Due to concerns over a global economic recession caused by the spread of the novel coronavirus infection (COVID-19), demand for smartphones and other products has sharply declined, leading semiconductor prices to turn downward. If COVID-19 does not subside quickly, it is inevitable that the earnings of domestic semiconductor companies such as Samsung Electronics and SK Hynix will be adversely affected.

According to semiconductor market research firm DRAMeXchange on the 27th, as of the 24th, the spot price of DDR4 8Gb DRAM was recorded at $3.41. The spot price of DDR4 8Gb DRAM, mainly used in PCs, steadily rose from $3.03 at the beginning of the year to $3.60 earlier this month.

This was because DRAM manufacturers, who experienced a slump last year, reduced supply, and demand for server DRAM increased as non-face-to-face work such as telecommuting and video conferencing expanded due to COVID-19. The fixed prices, which companies mainly contract, also showed an upward trend, with the average price for DDR4 8Gb DRAM in March recorded at $2.94, up 2.1% from the previous month.

However, the situation reversed from mid-this month. The spot price of DDR4 8Gb DRAM has fallen more than 5% in the past two weeks. The industry views this as the full impact of COVID-19 affecting the semiconductor market. It is analyzed that the recent spread of COVID-19 in North America and Europe, the largest markets for electronic products, is reflected in recent semiconductor prices.

In particular, it is interpreted that the smartphone market, which heavily uses semiconductor DRAM, has been severely hit by COVID-19. Market research firm Strategy Analytics (SA) predicted that the global smartphone market size will decrease by at least 10% compared to the previous year due to the spread of COVID-19. In fact, smartphone sales in the United States fell by 48% compared to the previous month as of the last week of last month, and sales cliffs due to COVID-19 are being felt worldwide.

Negative forecasts from the semiconductor industry continue. U.S. semiconductor market research firm IC Insights forecasted that the global semiconductor market size will decrease by 4% to $345.8 billion this year compared to the previous year. This firm had projected an 8% growth in the semiconductor market in January this year, then lowered it to 3% growth last month, and has now further downgraded the forecast. It diagnosed that demand reduction is inevitable as COVID-19 spreads to major semiconductor consumer countries such as the U.S. and Europe.

The organization expects that global semiconductor capital expenditure will decrease by about 3% to $99 billion this year compared to the previous year. Global semiconductor capital investment, which peaked at $105.9 billion in 2018, is expected to contract for two consecutive years this year and last year.

The semiconductor industry's downturn increases the earnings uncertainty of major domestic companies such as Samsung Electronics and SK Hynix. Although Samsung Electronics and SK Hynix recently announced first-quarter earnings that were better than market expectations, they are considering the possibility that second-quarter earnings may worsen compared to the first quarter.

An SK Hynix official said, "Due to COVID-19, the uncertainty in the semiconductor market is greater than ever," adding, "If COVID-19 prolongs, there is concern about a decrease in demand even for relatively steady server semiconductors."

However, if COVID-19 subsides faster than expected, the semiconductor market could quickly turn around. Myungseop Song, a research fellow at Hi Investment & Securities, forecasted, "If COVID-19 has not yet significantly impacted the semiconductor market and the spread in the U.S. and Europe eases within the second quarter, the semiconductor market recovery could gain momentum in the second half of the year."

This content was produced with the assistance of AI translation services.