A technician holds a semiconductor wafer at a producing plant.
Ponywang | E+ | Getty Photographs
The current earnings calls of the world’s two largest reminiscence chipmakers signaled that weak demand could have lastly bottomed out.
Samsung’s working revenue within the third quarter jumped 262.6% as in comparison with the second quarter. This adopted a 85.15% drop in first quarter working revenue from the earlier quarter and a small 4.68% enchancment in second-quarter working revenue from the primary quarter.
SK Hynix in its quarterly report mentioned that its dynamic random-access reminiscence enterprise returned to revenue within the third quarter, after losses within the first two quarters of this 12 months.
“One of many huge drivers of reminiscence worth recovering is industry-wide provide discount and thus falling inventories,” James Lim, senior analysis analyst at Dalton Investments, advised CNBC.
“Inventories at private pc and cellular prospects appear to have come down quite a bit and really low reminiscence costs are inclined to induce restocking or having extra reminiscence content material per system,” mentioned Lim.
The South Korean corporations are the world’s two largest makers of DRAM chips, in line with information from market analysis agency TrendForce, with U.S.-based Micron trailing in third place. Such reminiscence chips are present in client units comparable to laptops and smartphones.
“We acquired quite a few buy inquiries amid widening consciousness of the {industry} reaching a backside, following the industry-wide manufacturing cuts,” Samsung mentioned in its earnings report final week. Chipmakers have been operating down extra inventories by scaling again manufacturing.
Through the pandemic, corporations stockpiled reminiscence chips to satisfy document electronics demand, however have been left with extra stock when that strain eased. Inflation has brought on shoppers to rein in spending and reduce on purchases of client units, driving down demand and costs for reminiscence chips.
Kazunori Ito, director of analysis at Morningstar, mentioned that “earnings calls confirmed that the reminiscence {industry} has bottomed out as anticipated.”
“DRAM common promoting costs, or ASPs, rose by midsingle digits for Samsung and 10% for SK Hynix, sequentially, and it was the primary time in eight quarters that Samsung skilled a worth improve,” Ito mentioned in a Nov. 1 report.
“We now have made minor changes to our earnings forecasts for South Korean reminiscence suppliers,” Ito mentioned. The monetary companies agency added that Samsung’s shares are “undervalued” whereas SK Hynix’s shares “have about 18%-20% upside to our honest worth estimate.”
Different chipmakers have additionally projected robust outlooks.
The world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Firm exceeded analysts’ expectations and predicted the worst may quickly be over for the chip {industry}. TSMC makes essentially the most superior processors for corporations like Apple and Nvidia based mostly on Arm’s structure.
U.S.-based Qualcomm additionally gave a powerful forecast for the present quarter, pointing to a chip restoration. Qualcomm makes the processors on the coronary heart of most high-end Android units and lots of lower-end telephones as nicely.
“Though stock ranges peaked in mid-2023, they’re nonetheless on the excessive ranges, particularly for NAND [flash memory],” Ito of Morningstar mentioned.
NAND is one other essential reminiscence chip that usually works along with DRAM in PCs, servers and smartphones. It shops information however doesn’t require energy like DRAM.
“In consequence, reminiscence suppliers are anticipated to proceed sustaining decrease capability utilization and to stay cautious about rising manufacturing capability subsequent 12 months, which ought to be favorable for reminiscence costs as a consequence of restricted provide,” Ito mentioned.
TrendForce mentioned it expects reminiscence suppliers to proceed “scaling again manufacturing of each DRAM and NAND Flash in 2024,” particularly within the “financially struggling NAND Flash sector.” The analysis agency additionally projected DRAM and NAND Flash demand to extend by 13% and 16% respectively in 2024.
AI increase to uplift income
Within the third quarter, robust demand for superior, high-performance chips in generative AI has helped offset a slowdown for chips present in computer systems and smartphones, SK Hynix mentioned in its earnings report.
“On servers, AI demand has been one other robust driver,” mentioned Lim of Dalton Investments.
ChatGPT and different giant language fashions want numerous superior reminiscence chips, which allow such generative AI fashions to recollect particulars from previous conversations and person preferences in an effort to generate humanlike responses.
“DRAM enterprise … is anticipated to proceed to enhance together with the generative AI increase. The NAND flash enterprise, which continues to endure losses, can also be displaying indicators of enchancment,” SK Hynix mentioned in an announcement.
On the outlook for reminiscence demand, Samsung mentioned it expects fourth-quarter demand to select up with year-end promotions, new product launches by its main prospects in addition to robust demand for generative AI.
