Samsung, SK hynix pause price negotiations as Taiwan earthquake halts TSMC

The logo Taiwanese chip giant TSMC at Southern Taiwan Science park in Tainan, Taiwan on Dec. 29, 2022. [REUTERS]

Samsung Electronics and SK hynix may benefit from the recent earthquake in Taiwan, which has disrupted the production of Taiwanese semiconductor giant TSMC, according to analysts.

The two Korean chipmakers have paused second-quarter negotiations as they await the quake's impact on prices, although neither firm has production lines in the region.

“DRAM suppliers and module factories have temporarily ceased pricing activities,” according to Taiwan-based market research firm TrendForce, reflecting a cautious approach in the aftermath of the earthquake.

TrendForce added that U.S.-based Micron Technology has suspended negotiations for the upcoming quarter, citing the need to assess earthquake-related losses before engaging in price discussions.

TSMC, the world's largest contract chip manufacturer, said in a statement Thursday that the natural disaster had impacted its production lines more severely than it was expected to.

“Certain production lines in areas which experienced greater seismic impact are expected to require more time for adjustment and calibration before returning to fully automated production,” TSMC wrote, hinting that the actual scale of the damage could surpass initial estimates.

DRAM prices, typically set through supplier-customer talks, have held steady at around $1.8 per unit (based on PC applications) over the past three months.

“Micron's decision to suspend contract discussions during second-quarter sales price negotiations aims to bolster its bargaining power amid supply chain disruptions,” said Kim Seon-woo, an analyst at Meritz Securities. Citigroup forecasts double-digit increases in DRAM prices for the second quarter compared to the first quarter.

Industry insiders warned that the quake's impact on Taiwanese semiconductor facilities, including TSMC, could ripple through the global semiconductor landscape, potentially affecting Korean firms indirectly.
“The disruption in TSMC production is expected to positively influence Samsung Electronics' second-quarter DRAM and foundry price negotiations,” according to Kim Dong-won, an analyst at KB Securities, potentially tripling the company's second-quarter semiconductor profits.

Reuters, citing Barclays analysts, reported that halts to the operation of “some highly sophisticated semiconductor fabs ... could cause a “short-term hiccup” to electronics manufacturing in economies focused on upstream products, such as Japan and Korea, as well as economies focused on downstream products, such as China and Vietnam.” The report suggested that lower inventory levels among customers could empower Taiwanese and Korean chipmakers to hike prices.

Eyes are also on SK hynix, a significant supplier of high bandwidth memory (HBM) to TSMC.

In 2023, Korea exported memory chips worth $3 billion to Taiwan, the Korea International Trade Association revealed. Analysis indicates that a significant portion of these chips, which SK hynix sold to Nvidia, were HBM packaged by TSMC.

“The entire process of HBM manufacturing takes place internally at SK hynix,” an official from the Korean chipmaker said.

“The packaging process at TSMC occurs only after our HBM delivery to the final customers, involving discussions between them and TSMC,” the official added, downplaying the quake's direct effects on its operations.

BY PARK HAE-LEE [seo.jieun1@joongang.co.kr]