Memory prices plunge despite growing datasphere

Prices of memory chips are declining sharply amid sluggish demand for smartphones, even as the world produces more data to store and process.

Samsung Electronics dynamic random access memory (DRAM) was down more than 30per cent on the quarter at one point in the October-December period. Its NAND flash memory suffered a nearly 30per cent decrease.

SK Hynix saw the biggest drops since 2008, Chief Financial Officer Kim Woo-hyun has said.

Memory prices began falling in the July-September quarter, data from Taiwan-based TrendForce shows. They went down 20per cent to 25per cent on the quarter in the October-December period and were seen suffering a further decline of more than 10per cent in the January-March quarter.

This has dealt a heavy blow to major memory producers. Operating profit at Samsung’s semiconductor business plunged 97per cent on the year in the October-December quarter. SK Hynix and Kioxia Holdings fell into the red that quarter.

Headwinds are expected to persist this year. World Semiconductor Trade Statistics in November predicted that the global memory market would shrink 12.6per cent by value in 2022 and 17per cent in 2023.

Overall, it saw the global semiconductor market shrinking in 2023 for the first time since 2019.

Back in the late 2010s, semiconductor companies had hoped that the industry’s boom-and-bust cycles will eventually make way to sustained growth as demand for data storage and processing grew.

The so-called global datasphere will more than double by 2026 to 221 zettabytes -- or 221 trillion gigabytes -- U.S. research company International Data Corp. predicted in 2022. Flash memory shipments increased 29.8per cent in 2022 in terms of capacity and will grow another 20.6per cent in 2023, according to TrendForce.

Yet the semiconductor market has struggled to continue growing in value terms as technological advances drive down unit prices. The cost of solid-state drives, which are powered by flash memory, fell by more than half from 2018 to 10.7 cents per gigabyte in 2022, according to Tokyo-based Techno Systems Research.

Declining demand further hampered the industry in the second half of 2022. Global shipments of smartphones -- which account for around 40per cent of all memory demand -- fell 11per cent that year, according to IDC, amid China’s economic slowdown and other setbacks.

Chips take months to produce, so manufacturers are hard-pressed to adjust to sudden shifts in demand. Meanwhile, inventories piled up at clients and trading houses, exerting downward pressure on prices.

SK Hynix sees inventory levels peaking in the January-March quarter and the supply-demand balance to improve in the second half. The overall market is expected to start recovering once existing inventories dwindle and memory producers can ramp shipments back up.

Investors are starting to price the recovery in, with Samsung shares up 9per cent from the end of 2022 and SK Hynix up 16per cent as of Wednesday. But the stocks are down 20per cent to 30per cent from where they were at the end of 2021.