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Analyst warns a bad year for memory


Monday, June 24, 2019

A report by Goldman Sachs noted that slowing demand for memory chips from China, due to the US sanctions on Huawei, could lead to DRAM inventory pileups and subsequent price falls.

Huawei’s smartphone division is a major customer of SK hynix, and SK’s newest DRAM plant in China is reportedly getting ready for full operations at a slower pace than planned, due to decreased orders in China.

“SK hynix could report quarterly deficits starting in the fourth quarter of this year and throughout the first half of next year,” said a report by Meritz Financial Group.

The world’s second-largest memory provider, SK hynix last reported an operating deficit in the third quarter of 2012. Since the fourth quarter of that year, the chipmaker has posted surpluses owing to a memory chip boom.

The memory chip market was initially expected to hit rock bottom in the fourth quarter of this year, but the US investor has postponed the timeline for its prediction to the second quarter of 2020.

The NAND flash market will bottom out in the fourth quarter, about three months later than previously predicted, the report said.

According to chip price tracker DRAMeXchange, DRAM prices will decline 10 to 15 percent during the July to September period of this year, as compared with an initial forecast of around 10 percent.

The market researcher says DRAM prices will continue diving more than 10 percent in the fourth quarter.

It was initially projected that demand for memory chips would recover in the third quarter of 2019. But macro geopolitical issues, like the Trump administration’s blacklisting of Huawei products, have made a strong recovery less likely, financial analysts say.

“Inventories at data center companies are expected to return to the normal levels in the fourth quarter of this year, which could signal a turnaround for the memory market,” said Choi Do-yeon, an analyst at Shinhan Investment Corp.

Meanwhile, Huawei’s impact on Samsung Electronics’ semiconductor division is expected to be offset by unexpected gains for its set division. Forecasts about its annual performance are divided.

“Samsung’s smartphone and network divisions will gain greater benefits the longer the US sanctions remain in place,” said Hwang Min-seong, analyst at Samsung Securities. “However, the semiconductor division will face falling demand and inventory pileups.

“Overall, considering the Huawei gains and favorable currency exchange rates, Samsung could expect a modest 1.4 percent increase in its annual operating profit,” he said.

However, quarterly earnings forecasts for Samsung’s device solutions division are not promising.

The semiconductor unit is projected to report an operating profit of around 2.8 trillion won for the second quarter and 3.9 trillion won for the third quarter, according to a report from IBK Investment & Securities.

By: DocMemory
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