[NEWS IN FOCUS] Rosy outlook dimming for tech

Home > Business > In-depth

print dictionary print

[NEWS IN FOCUS] Rosy outlook dimming for tech

테스트

For smartphone makers, semiconductor producers and other tech companies in Korea, 2020 was set to lick the wounds of 2019 with the introduction of 5G, and an upturn in the cyclical semiconductor industry was expected to improve profitability.

But those optimistic notes have fallen mostly flat as the coronavirus outbreak ushers in widespread uncertainty, although there remains some bright spots.

Analysts and market trackers say that chipmakers such as Intel, Samsung Electronics and SK hynix could fare relatively better in the first and second quarters thanks to already-low inventory from clients, along with a surge in demand for server dynamic random access memory (DRAM).

But the true challenge will come in the third quarter.

“DRAM and NAND flash average selling prices are able to maintain their growth in 1Q20 and 2Q20 primarily because of relatively low client inventory levels,” said TrendForce, a global technology market research firm that owns the memory chip-focused research division DRAMeXchange. “TrendForce believes the true challenge facing the memory industry will surface in 3Q20, when sluggish consumer demand will encumber device manufacturers’ inventory reduction efforts, massively weakening client-side memory procurement and resulting in limited growth of the average selling price.”

Over the course of one month, nearly 93 trillion won ($74.8 billion) was wiped away from SK hynix and Samsung Electronics, Korea’s two largest listed companies by market capitalization, as of March 16.

The coronavirus outbreak poses a mixture of upside factors and downside risks. A jump in the number of people working from home globally has translated into a rise in server demand from corporate data centers.

Subsequently, the price of the server DRAM will likely expand 20 percent in the second quarter compared to the previous quarter, according to the TrendForce report released on March 10.

Buoyed by the strong demand, the research firm said those shipments are projected to jump 5.1 percent on year in 2020, or 3.1 percent under its more pessimistic scenario.

Kim Kyung-min, an analyst at Hana Financial Investment, echoed that view.

“The shipments of servers will increase by 3.1 percent due to the rise in remote working and increased online content consumption,” Kim said.

Consumer sentiment bruised by the fatal virus, however, will erode sales of smartphones and computers, which in turn will prompt electronics makers to cut back their orders of chips.

In this sense, Samsung Electronics will likely face a more complex challenge than SK hynix or other chip producers, as it is also the world’s largest smartphone maker and a leading appliance manufacturer.

Lowering the tech giant’s target price from 67,000 won to 63,000 won, Kim said that Samsung will be hit harder by the outbreak.

“SK hynix will likely rebound more swiftly than Samsung Electronics, since Samsung has mobile phones and consumer electronics as well as semiconductors impacted by the outbreak” the analyst said.

Different institutions are revising down their consumption projections for electronic devices as the spread of the pandemic eats away consumer sentiment.

The International Data Corporation, a U.S.-based research service company, forecasts that spending on digital devices, including smartphones and computers, will likely experience a significant slowdown.

“By the end of 2020, in a pessimistic scenario, IT spending could grow by 1 percent compared to the original forecast of more than 4 percent growth, and these forecasts are more likely to trend down than up in the next few weeks,” it said in a report issued last week.

Samsung already feels the pinch of the soft demand trend as its newest flagship Galaxy S20 smartphone showed modest sales data during the early days of the launch.

Although concrete data for the number of the entire units sold are not yet available, the smartphone’s launch day performance was far weaker than its predecessors.

Samsung moved 70,800 units of the 5G-enabled S20 series on launch day earlier this month, compared with 140,000 units for the Galaxy S10 and 220,000 units for the Galaxy Note10 which was released in August last year.

With the bearish consumer sentiment and supply chain disruptions in China, a number of financial institutions and brokerages expect that global smartphone shipments will fall this year compared to last year.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]

More in In-depth

[NEWS IN FOCUS] Foreign punters are very bullish on Samsung shares

[NEWS IN FOCUS] Bill Gates' complimentary letter falls flat when it comes to facts

[NEWS IN FOCUS] Foldable smartphones are so 2019. How about a rollable?

[NEWS IN FOCUS] Property market measures failing, more are threatened

[NEWS IN FOCUS] SsangYong's brinkmanship fails as KDB says no to loan

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now