As Memory Shrinks, Samsung Electronics Expands Its Non-Memory Territory

[Asia Economy Reporter Changhwan Lee] There is a forecast that the rebound in memory semiconductor prices will take longer than expected. This is because server DRAM demand has not yet recovered due to the prolonged economic downturn caused by the novel coronavirus disease (COVID-19).

Amid difficulties in the memory semiconductor market, Samsung Electronics is significantly expanding its foundry (contract manufacturing) business, which is a non-memory semiconductor sector, to grow its semiconductor business.

According to market research firm DRAMeXchange on the 3rd, the fixed price of server DRAM (DDR4 32GB) last month recorded $128, down 4.5% from the previous month. Following a 6.4% decline in July compared to the previous month, this marks two consecutive months of decline. Last month, the price of PC DRAM (DDR4 8Gb) remained the same at $3.13 as the previous month.

As the downward trend in server DRAM prices continues, the overall DRAM market is considered to be shrinking. Server DRAM accounts for 30-40% of total DRAM market sales. The rest is occupied by mobile DRAM and PC DRAM, among others.

The decline in server DRAM prices is due to major customers such as Amazon, Google, and Microsoft (MS) reducing purchases in the second half of the year after expanding data centers and increasing DRAM inventory to meet the increased non-face-to-face (untact) demand caused by COVID-19 in the first half of this year. It is known that they are refraining from additional purchases as they already have sufficient DRAM inventory.

Accordingly, server DRAM prices are expected to remain weak until the fourth quarter. Lee Seung-woo, a researcher at Eugene Investment & Securities, said, "Companies that increased data center capacity due to COVID-19 are expected to sustain internet demand without significant investment for the time being, leading to a decrease in semiconductor purchases," and added, "Server DRAM prices may fall an additional 10% in the fourth quarter following a 10% decline in the third quarter."

As fixed DRAM prices fall, the possibility of negative impacts on the third-quarter performance of our semiconductor companies has also increased. However, in the case of Samsung Electronics, it is evaluated that conditions are in place to overcome memory sector sluggishness as it rapidly expands its business area into non-memory semiconductors.

Samsung Electronics recently agreed to manufacture next-generation graphics processing units (GPUs) for the U.S. graphics card company Nvidia on a contract basis. Nvidia announced on the 1st (local time) the launch of its next-generation GPU 'GeForce RTX 30' series and stated that the new products will be produced through Samsung Electronics' 8-nanometer foundry.

Until now, Nvidia has produced semiconductors using Taiwan's TSMC process, but the latest GPU introduced this time will utilize Samsung Electronics' 8-nanometer (nm) process.

Following last month’s agreement to manufacture IBM's next-generation server central processing unit (CPU) 'Power10' on a contract basis, Samsung Electronics is evaluated to have created an opportunity to take a step forward in the foundry sector by additionally securing Nvidia as a major client.

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