The Semiconductor Market Is Not Easy to Be Optimistic About, COVID-19 Clouds Remain

[Asia Economy Reporter Changhwan Lee] Although semiconductor fixed prices have shown an upward trend for four consecutive months, spot prices and exports have been sluggish, raising concerns about the improvement of the semiconductor market. Analysts say that the recovery of the semiconductor market depends on whether the novel coronavirus disease (COVID-19) is overcome early.

According to market research firm DRAMeXchange on the 4th, the fixed transaction price of DDR4 8-gigabit (Gb) DRAM products, mainly used in PCs, averaged $3.29 last month. The month-on-month increase of 11.9% is the largest in 3 years and 3 months since January 2017.

The fixed price of DDR4 8Gb DRAM, which rebounded to $2.84 in January after 13 months, rose to $2.88 in February and $2.94 in March, and continued to rise sharply in April.

The overall price increase was led by a significant rise in server DRAM demand. The average price increase rate of server DRAM in April was 19.9% month-on-month, a sharp jump compared to 5.2% in March. It is evaluated that the spread of the COVID-19 virus increased demand for remote work and online activities, and semiconductor inventory accumulation by server and PC companies led to the rise in server DRAM prices.

However, the trend in spot prices is the opposite. Samsung Electronics and SK Hynix use fixed prices when dealing with customers, so changes in fixed prices are more important to semiconductor companies. However, spot prices reflect market sentiment more quickly and tend to lead fixed prices, so spot prices are also used as an important market indicator. Typically, fixed prices follow spot prices with a lag of 1 to 2 months.

The spot price of DDR4 8Gb DRAM was $3.32 as of the end of last month. The spot price of DDR4 8Gb DRAM peaked at $3.60 at the beginning of last month but has been declining for three consecutive weeks. It is analyzed that the recent spread of COVID-19 in North America and Europe, the largest markets for electronic products, has been reflected in semiconductor spot prices.

COVID-19 is also negatively impacting South Korea's semiconductor exports. According to the Ministry of Trade, Industry and Energy, South Korea's semiconductor exports last month amounted to $7.176 billion, down 14.9% year-on-year and 18.1% month-on-month. This is the largest decline this year.

Despite the rise in DRAM fixed prices, the overall export volume has decreased, resulting in semiconductor exports recording negative growth for two consecutive months. In particular, the smartphone market has been hit hard by COVID-19, leading to a significant drop in semiconductor exports for mobile phones. According to market research firm Counterpoint Research, global smartphone shipments in March fell sharply by 23% year-on-year, and although April data is not yet compiled, the decline is expected to have continued.

The semiconductor industry has been relatively less affected by COVID-19 compared to other industries such as aviation, travel, lodging, and automobiles. The better-than-expected first-quarter performance of Samsung Electronics and SK Hynix supports this. However, if COVID-19 prolongs mainly in Western countries, negative impacts may increase.

The semiconductor industry believes that the turnaround of the semiconductor market depends on whether COVID-19 ends early. It is expected that server semiconductors will lead the market recovery, and the timing of the rebound will be accelerated depending on the recovery of smartphone semiconductors. IC Insights forecasts that the memory semiconductor market will grow by 21% next year compared to this year.

Dongwon Kim, a researcher at KB Securities, said, "From the second quarter, when COVID-19 is fully reflected, semiconductor prices will rather rise due to increased data center demand," adding, "If the spread of COVID-19 slows down from June, demand rebound can be expected from the third quarter."

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