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| A smartphone with Huawei and 5G network logos is seen on a PC motherboard in this illustration from Jan. 29. Reuters-Yonhap |
By Kim Yoo-chul
The world's top two computer memory chipmakers ― Samsung Electronics and SK hynix ― didn't deny that average selling prices (ASPs) of both DRAM and NAND flash memory chips are expected to face continued pressure throughout the third quarter of this year but suggested the impact will be limited.
Memory chip prices are considered a key barometer to gauge the profitability of the two Korean firms which are heavily dependent upon sales of the chips. The chip industry is also one of Korea's backbone industries along with airlines, steel production and carmakers.
According to senior fund managers at Europe- and U.S.-based investment banks, the current headwinds will ease soon and the next few quarters should start to show improvements in Samsung and SK's results. The biggest challenge to such optimism is none of the current data about DRAM and NAND pricing indicates a rebound is actually taking shape.
But the key considerations are that demand for smartphones and new gaming consoles to be launched in the fourth quarter of this year will likely offset the price weakness. Also, chances are high that customers will resume inventory build-up during the last three months of this year when prices decline further.
"On the supply side, major suppliers commented in their earnings on no significant capacity expansion until the end of 2020 ― which won't impact supply and demand balance until 2021, where we see significant additional supply will be needed," Bernstein Research's Senior Analyst Mark C. Newman wrote in a note to investors.
"Despite the short-term negatives, we remain bullish on the medium- to long-term prospects on the memory industry. We expect next year's supply-and-demand balance to be tight but see continued short-term headwinds as price and demand remain weak for the second half of this year," according to the report.
The questions are, though, "how quickly" and "to what extent" this can happen. Given the expectations that prices may rise, there would also be a plus factor in terms of recovering the country's exports.
Korea's real GDP contracted 3.2 percent for the second quarter from the first quarter, posting 448.2 trillion won ($378.1 billion), according to the Bank of Korea (BOK). Korea's?exports in August posted $39.6 billion, a 9.9 percent year-on-year decline from $44 billion in 2019, according to the Ministry of Trade, Industry and Energy. The second quarter saw increases in exports of semiconductors (2.8 percent), home appliances (14.9 percent), bio-health products (58.8 percent), and computers (106.6 percent), while other products did not perform well.
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