DRAM revenue globally is still on the declineThe DRAM market continues to collapse, raising concerns about the fortunes of Korean semiconductor manufacturers - Samsung Electronics and SK Hynix - amid growing trade tensions between Korea and Japan.
According to a DRAMeXchange report released Thursday, global DRAM revenue in the second quarter fell 42.2 percent to $14.8 billion. A year earlier, the total was $25.7 billion.
It is down 9.1 percent from the first quarter, when $16.3 billion of revenue was recorded.
In the second quarter, sales of commodity DRAMs, server DRAMs and consumer DRAMs fell by nearly 30 percent. Server DRAM sales fell the most, down 35 percent.
DRAM prices have been falling continuously since the end of last year. In just six months, DRAM prices are down 59.4 percent.
Industry experts say the ongoing trade war between U.S. and China and reduced demand from global IT companies are the primary reasons for falling prices.
Korea’s exports have been shrinking for seven consecutive months. While the weakness of the Chinese economy, struggling as a result of the trade war, has been a factor, the fall of semiconductor demand has played a role. In the first six months of this year, semiconductor exports fell 22.5 percent year-on-year.
The situation is unlikely to turn around soon.
DRAMeXchange said while the material export restrictions imposed by the Japanese government on Korea early last month caused prices to bounce back on the spot market, it added that it was not effective enough to clear the large inventories.
“Despite the ripples in the market formed as a result of the Japan-South Korea incident, contract prices mainly depend on the basic supply-demand dynamics,” the DRAMeXchange report stated. “Since production capacity was not affected substantially, we don’t see it as a significant force keeping prices up.”
It added that mobile DRAMs and service DRAMs, which account for up to 70 percent of shipments, will likely remain on a downward trend in the third quarter.
Samsung Electronics in the second quarter reported 6.6 trillion won in operating profit. This is a 55.6 percent drop compared to a year ago. Its operating profit nosedived largely as a result of the sluggish semiconductor business. Semiconductor operating profit fell 70 percent year-on-year to 3.4 trillion won. It is the first time since 2016 that the company’s semiconductor operating profit was below 4 trillion won.
SK Hynix has been faring poorly as well. It also reported the smallest operating profit in three years in the second quarter. The chipmaker’s operating profit fell 89 percent compared to the same period a year earlier.
DRAMeXchange projected that the semiconductor manufacturers are likely to continue to face declining profitability as chip prices fall.
Despite falling profits, the market share of the Korean makers increased. As of the second quarter, together they controlled 75 percent of the market, up 1.8 percentage points from the previous quarter. Samsung’s market share was 45.7 percent, up 3 percentage points. The market share of SK Hynix fell 1.2 percentage points to 28.7 percent.
BY LEE HO-JEONG [firstname.lastname@example.org]
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