Since August of last year, the price of DRAM has entered a downward trend, showing no signs of recovery until January this year. After sharply dropping by 17% in September and 20% in November last year, the DRAM price has been trapped in a trading range, and it is expected to show even poorer performance in the first quarter of this year. As a result, forecasts suggest that Samsung Electronics' performance in the first quarter will be worse than initially expected.
According to market research firm DRAMeXchange on the 6th, the average fixed transaction price for general-purpose DDR4 8Gb 1Gx8 DRAM for PC in January was recorded at $1.35, unchanged from the previous month. DRAM prices fell into a downward trend since August last year, experiencing double-digit declines in September (-17.07%) and November (-20.59%), and have remained stable since December.
Even in January, the trade market remains sluggish due to the impact of the largest Chinese holiday, Lunar New Year, and inventory reductions by clients. Moreover, the inventory levels of DRAM suppliers are rising again, reaching levels between 13 and 18 weeks in the fourth quarter of last year. Analysis suggests that demand for DRAM is not expected to recover anytime soon. Market research firm TrendForce noted, "If there are no signs of improvement in front-end demand in February and March, transaction prices may show a downward trend again."
During the conference call on the 2024 fourth-quarter performance held last month, Samsung Electronics said, "The DRAM business will be more challenging in the first quarter compared to the fourth quarter of last year," adding, "Demand for mobile and PC remains weak, and in the case of high-bandwidth memory (HBM), demand uncertainty is increasing due to export controls on semiconductors for artificial intelligence (AI)." They also mentioned, "There is a delay in HBM demand, which is expected to lead to a decrease in sales volume, indicating that the first quarter will see weakness in general-purpose DRAM and HBM sales being worse than expected."
Particularly, Samsung Electronics, which relies heavily on general-purpose DRAM sales, is seeing a downward trend in performance expectations. Koh Young Technology analyst said, "The downward revision of annual earnings consensus could end once visibility on earnings bottoms out, but at the current point, it is difficult to determine whether that will be in the first or second quarter."
Chae Min-sook, an analyst from Korea Investment & Securities, projected Samsung Electronics' revenue, stating that it is still "a daunting situation," and estimated that the DeepSeek shock would lead the Trump administration's second term to strengthen export restrictions on AI semiconductors. She explained that with a high proportion of HBM sales going to China, the unfavorable situation for Samsung Electronics, which must rely on redesign products for most sales directed to U.S. clients, is evident.
Cha Yong-ho, an analyst at LS SECURITIES, stated, "With the memory downcycle continuing, price weakness is expected," and projected that HBM sales would amount to 4.3 trillion won, a decrease of 26% compared to the previous quarter, due to direct export restrictions to China and shifted demand towards improved products. He also expected that the non-memory division's losses would expand to 2.8 trillion won due to decreased operating rates and additional export restriction impacts on China.
LS SECURITIES estimated that Samsung Electronics' revenue for the first quarter of this year would increase by 6% year-on-year to 76.1 trillion won, while operating profit is expected to drop by 33% to 4.7 trillion won. This level is below market expectations, which forecast revenue of 76.5 trillion won and operating profit of 5.5 trillion won. Additionally, Yuanta Securities Korea provided the lowest operating profit forecast at 4.295 trillion won, while eight securities firms expect operating profits in the 4 trillion won range.