Samsung reportedly closed deal with China to lower DRAM pricing

Posted on Wednesday, Feb 07 2018 @ 14:32 CET by Thomas De Maesschalck
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Word is going around that Samsung signed a deal with China’s National Development and Reform Commission (NDRC) to moderate the pricing of DRAM chips. TrendForce's DRAMeXchange says the memorandum of understanding (MOU) also includes a further cooperation, in terms of expanding investment in China and technical collaboration. Not a lot of details are known but TrendForce expects this will result in lower DRAM chips. China is one of world's largest consumers of DRAM.
The climbing prices of DRAM over the past six quarters have added the cost pressures of Chinese smartphone brands. As the result, China’s National Development and Reform Commission (NDRC) has expressed concerns to Samsung at the end of 2017. And the intervention is expected to moderate the price increases of mobile DRAM in 1Q18, according DRAMeXchange, a research division of TrendForce. It is said that Samsung Electronics, backed by Korean government, is signing a memorandum of understanding (MOU) with NDRC. The MOU is believed to include details of further cooperation in semiconductor industry, such as expanding the investment in China and technical collaboration.

In recent years, China remains the largest importer of memory chips driven by its domestic and exporting demands. Therefore, Samsung has to show respect and give response to the opinions of China. According to Avril Wu, research director of DRAMeXchange, the MOU to be signed may influence the global memory market in the following two aspects.

1. DRAM still faces a tight supply, but the price growth will be moderated
On one hand, for memory products suppliers, current profit of mobile DRAM is much lower than that of other products. Affected by the sluggish demand of smartphones in 1Q18 and the intervention by NDRC, the price growth is expected to be limited. For the future, suppliers may continue to shift their existing production capacity from mobile DRAM to other products with higher gross margin, resulting in less price increases of other products as well.

2. Suppliers have a higher possibility to expand production capacity to moderate price increase
On the other hand, in the sector of NAND Flash, the portion of 3D NAND Flash in suppliers’ product mix will continue to increase, which has largely eased the tight supply compared with last year. However, in terms of DRAM, new bit output has not be available yet, resulting in ongoing undersupply. DRAMeXchange notes that suppliers may be more active in production capacity expansion in the condition that Chinese government intervenes in pricing and suppliers find it hard to lower the costs. Increasing the bit output by production capacity expansion will not only stabilize the price, but also allow suppliers to maintain the absolute amount of profit of DRAM products.

About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

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