D-RAM Price Weakness, Huawei's Temporary Boost Losing Momentum

Server Inventory Levels Still High, Expected to Rise Around First Half of Next Year

[Asia Economy Reporter Changhwan Lee] Memory semiconductor prices continued to weaken. This was due to the short-lived special demand caused by Huawei's semiconductor stockpiling ahead of U.S. sanctions, as well as continued sluggish demand for server DRAM.

If the U.S. semiconductor sanctions are prolonged, not only Chinese companies but also related companies such as Samsung Electronics and SK Hynix are expected to inevitably suffer damage. However, there is also analysis that semiconductor prices will turn upward in the first half of next year as recent mobile demand has revived and exports have improved.

According to market research firm DRAMeXchange on the 5th, the fixed price of server DDR4 32GB DRAM last month recorded $122, down 5% from the previous month. It has been declining for three consecutive months since hitting a yearly high of $143 in June. The fixed price of DDR4 8Gb DRAM, mainly used in PCs, remained steady at $3.13, unchanged from the previous month. It has been flat for three consecutive months since June.

In the first half of this year, memory semiconductor prices rose sharply as orders for data center servers from major customers such as Amazon, Google, and Tencent increased due to the rise in non-face-to-face (untact) demand caused by the spread of COVID-19. However, in the third quarter, these companies accumulated server inventory and semiconductor orders decreased, causing prices to weaken.

The spot price of DRAM, which rebounded unexpectedly at the beginning of last month due to U.S. sanctions on Huawei, also returned to a flat trend. As of the 30th of last month, the spot price of DDR4 8Gb DRAM was $2.95, unchanged from the previous trading day.

The DRAM spot price surged 17% from a yearly low of $2.52 on August 24 to $2.95 in mid-last month. This is analyzed as a significant price jump due to Huawei's last-minute concentrated semiconductor purchases to stockpile inventory amid intensified U.S. sanctions.

However, around the 15th of last month, Huawei's semiconductor purchases were effectively blocked, and prices returned to a flat trend. DRAM prices failed to rise further and remained in the $2.9 range for two consecutive weeks from the 11th to the end of last month.

◆Price Weakness Expected Through Q4 Due to DRAM Demand Shortage

The semiconductor industry expects that memory semiconductor prices will continue to weaken through the fourth quarter due to the end of Huawei's special demand and ongoing DRAM demand shortages.

Market research firm TrendForce forecasted that server DRAM prices in the fourth quarter could fall by up to 18% compared to the previous quarter. TrendForce analyzed that server companies have excessively high inventory levels.

It explained that server companies had stockpiled inventory in preparation for increased untact demand but have not yet properly depleted it. It is expected that it will take at least one to two additional quarters for them to normalize semiconductor inventory. It also pointed out that Huawei, a major player in the industry, no longer being able to purchase semiconductors is an additional factor for further price declines.

Some expect that DRAM prices may rise again from early next year after the year-end. This is because server DRAM orders from North American customers are expected to increase from the fourth quarter, and mobile DRAM sales are also expected to increase as smartphone sales have recently entered a recovery phase.

Dongwon Kim, a researcher at KB Securities, said, "From the fourth quarter of this year, North American data center companies are expected to resume server DRAM orders after six months," adding, "Due to the impact of COVID-19, with the continuous increase in traffic from untact demand such as telecommuting and online education, server expansion is necessary ahead of the year-end shopping season."

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