DRAM industry to oversupply next year as memory prices fall?

According to media sources, the trading price of DRAM memory, which has been on the rise since the beginning of this year, fell by nearly 10% in October alone. This can also be seen evidenced by data from market research firm TrendForce: DRAM general-purpose products for PCs (DDR4 8GB) traded at $3.71 in October, down $0.39 sequentially and 9.51% from the previous quarter, a drop that reached its highest rate of decline since July 2019, when prices plunged once to 11.18%. DRAM has been on an upward price trend since January of this year, and this is the first price drop of the year. According to its latest research data, the DRAM supply bit growth rate in 2022 is about 18.6%, however, as the current buyer inventory level is already high and the demand bit growth rate in 2022 is only 17.1%, the DRAM industry will shift from oversupply to oversupply next year. Although DRAM prices will decline due to oversupply, the overall output value will not drop significantly in an oligopolistic market situation. In terms of DRAM capital expenditures, the overall capital expenditure to revenue ratio has gradually increased in recent years, mainly due to two major reasons. (1) As DRAM process shrinkage has gradually faced its physical limit, after the 20nm process, except for Micron's 1α nm, which still creates nearly 30% single wafer growth, the growth of other processes from 1Xnm to 1Ynm, or 1Ynm to 1Znm, has converged to less than 15%. In 2022, Samsung and SK Hynix will formally introduce their state-of-the-art processes into the key EUV machine, which has a long production lead time and high cost, causing the three major OEMs to allocate large capital expenditures in advance to meet the EUV front-end orders. (2) Since DRAM has formed an oligopolistic market, even if the average price occasionally falls, the average sales price is difficult to fall below the total production cost because of the production order of suppliers, so DRAM original manufacturers are able to gradually accumulate profits from the production of this product. Due to the difficulty of process transfer, in addition to the three major original manufacturers, Nanya Tech and Winbond, which have smaller market shares, have actual expansion plans, which is another major reason for the continuous increase in the CAPEX to sales ratio in the DRAM market. In 2021, the chip capacity shortage will sweep across the world, the semiconductor industry will witness a structural transformation, and the storage industry will also face huge challenges. In the face of development opportunities and uncertainties, foreign storage majors such as Samsung and SK Hynix have been making moves. It is reported that, due to the downward trend of DRAM prices, Samsung and SK Hynix are also making adjustments to their inventories, although they are bullish on the storage market. It is reported that Samsung and SK Hynix will launch a shipment control program to control their DRAM supply. This move will be officially launched in the fourth quarter of this year, while both companies are planning to increase foundry capacity. For future market trends, using the oversupply ratio for each quarter next year as a basis for prediction, TrendForce expects the average DRAM unit sales price to decrease by 15% annually, with the price decline more pronounced in the first half of the year. In addition, the report expects that from the second half of next year, benefiting from the increased penetration of DDR5 and the peak season demand effect, the average DRAM price decline will converge and the possibility of a flat or price increase cannot be ruled out. Samsung Electronics plans to further improve its semiconductor cost competitiveness through 14nm DRAM and 7th generation 176-layer NAND Flash production lines in response to memory uncertainty. About NAND Flash: https://www.utmel.com/blog/categories/memory%20chip/what-is-nand-flash Samsung Electronics recently put into mass production the industry's smallest linewidth 14nm DRAM with five layers applying the EUV (Extreme Outer Line) process, achieving an industry-leading wafer density. The number of DRAMs on a wafer has increased by approximately 20% over previous generations, significantly reducing wafer costs. SK Hynix also said, "Uncertainty in the DRAM market is high in the short term." and has promoted profitability-focused management rather than competing for share through economies of scale.