"No Option but Price Cuts"... Semiconductor Prices Confirming Bottom Amid Inventory Burden

① Semiconductor Prices Hit Bottom

"There is no other option but to lower prices. DRAM suppliers are still burdened with high levels of inventory." - Market research firm TrendForce

Memory semiconductor prices fell further last month, once again confirming the inventory burden carried by major suppliers such as Samsung Electronics and SK Hynix.

On the 3rd, market research firm DRAMeXchange reported that the average fixed transaction price for PC DRAM general-purpose products (DDR4 8Gb) in March was $1.81. DRAM prices have maintained the $1.81 level for three consecutive months after falling 18.10% in January this year, breaking below the $2 mark.

The fixed transaction price refers to the contract transaction amount between companies and is considered the most representative indicator showing market conditions related to semiconductor supply and demand. DRAM prices were maintained at $4.10 until September 2021. However, in July last year, the price fell to $2.88, breaking below the $3 mark, and the price decline became more pronounced in the second half of the year, with the $2 mark also broken in January this year.

The market views the recent pause in the DRAM price decline as a "breather." It is believed that DRAM suppliers, still burdened with inventory, and their trading partners, IT manufacturers, are engaged in a waiting game ahead of full-scale price negotiations for the second quarter. TrendForce analyzed that DRAM suppliers have no choice but to reduce production and lower product prices to reduce excess inventory. Initially, TrendForce expected a 10-15% price drop in DRAM for the second quarter, but now a decline of up to 15-20% must be considered.

As demand for IT devices such as smartphones and laptops has not recovered, the price decline for NAND flash has been even greater. The fixed transaction price for NAND general-purpose products (128Gb 16Gx8 MLC) in March was $3.93 on average, down 5.12% from the previous month. Prices had remained stable around the $4 mark for five months, but this month’s price dropped more than 5%, falling below $3. TrendForce forecasts that the average selling price of NAND in the second quarter will decline 5-10% compared to the previous quarter.

To balance semiconductor supply and demand in line with the global IT demand slowdown, production must be reduced, and the memory semiconductor industry is currently working on inventory adjustment and production cuts. Choi Do-yeon, a researcher at SK Securities, said, "SK Hynix, Micron, and Kioxia are reducing investments and wafer input volumes to cut production," adding, "SK Hynix and Micron’s wafer facility investments (CapEx) in 2023 are expected to decrease by more than 50% compared to the previous year."

While industry leader Samsung Electronics maintains that it is not implementing artificial production cuts, the industry believes that Samsung, which has significantly increased its market share, is likely to stop increasing supply and pursue a profitability-focused strategy by cutting production. Some argue that since orders from test and component companies to Samsung Electronics in the first quarter have decreased by more than 30%, Samsung is already conducting substantial production cuts. In fact, semiconductor production in South Korea in February fell 17.1% from the previous month and 41.8% compared to the same period last year, marking the largest decline since December 2008, when it dropped 18.1%.

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