Oversupply and higher inventories of memory chips have clouded the business outlook for chipmakers, including Samsung Electronics Co. Ltd. and SK Hynix Inc., dragging down both DRAM prices and the companies' share prices this month.
Tightened US restrictions against China’s Huawei Technologies Co., a key customer of the South Korean chipmakers, added to concerns about falling demand for memory chips, coupled with the negative impact of the coronavirus pandemic.
In response, both Samsung and SK Hynix have turned cautious on facility investment. But they will push ahead with highly-advanced chip rollouts to prepare for the release of upgraded smartphones and computer servers later this year, which should bolster the bottom line, their officials said during second-quarter conference calls late last month.
Samsung plans to produce fourth-generation DRAM memory chips using extreme ultra violet processing technology next year. The 10-nanometer Double Data Rate 4 (DDR4) DRAM is expected to lessen production time by 20%, compared to third-generation DRAMs.
As for SK Hynix, it began mass-producing the world’s first 128-layer NAND flash chips last year, the upgraded model of the current market’s mainstay product, the 96-layer NAND flash chip. The flash memory market's switch into 128-layer chips should help offset the impact of a drop in average chip prices, semiconductor industry sources say. They expect DRAM prices to rebound as early as the first quarter of next year.
“Technology upgrades will improve their profit margins,” said a semiconductor industry source. “Price falls will worsen their results, but the pace of price drops overall may not be as fast as expected.”
Shares in SK Hynix gained 3.8% to close at 74,500 won on Aug. 21, snapping a seven-day losing streak. SK Hynix shares had lost 13% between Aug. 1 and Aug. 20. Samsung Electronics ended flat at 55,900 won on Aug. 21, after declining 6% this month until Thursday's close.