Reminiscence Chip Makers Battle With Declines in Demand, Worth

The pandemic increase in reminiscence chips is on pause.

A decline in costs in current months has led the most important reminiscence gamers—together with

Samsung Electronics Co.


Micron Expertise Inc.

to challenge grim forecasts and undershoot already-lowered revenue estimates. Others have pledged to trim manufacturing capability plans fearing a worsening provide glut. Chip executives and business analysts don’t see worth declines bottoming out, and even moderating, till the center of subsequent yr.

Reminiscence chips—discovered inside smartphones, private computer systems and knowledge servers—present a barometer of well being for the semiconductor business, which is reckoning with a sudden shift from pandemic power to an abrupt drop-off in demand.

The typical contract costs for the 2 main sorts of reminiscence, known as DRAM and NAND flash, dropped by 15% and 28%, respectively, from the prior quarter throughout the July-to-September interval, based on TrendForce, a Taiwan-based market researcher. Costs for each sorts of reminiscence chips are anticipated to say no on a quarterly foundation within the fourth quarter and all of subsequent yr, as extra stock builds up, TrendForce estimates. However the double-digit declines ought to finish by the spring and be flat or minimal by the top of 2023.

The most recent indication of ache got here Friday, as Samsung, the world’s largest reminiscence maker, forecast a 32% drop in working earnings for the third quarter—far worse than analysts’ expectations. And on the finish of September, American rival Micron reported a forty five% drop in revenue and issued a subdued outlook for the present quarter.

SK Hynix Inc.,

No. 2 in reminiscence income, is predicted to report a decline in working revenue of about 40% from a yr earlier, based on analyst projections compiled by


Individuals tried out Samsung smartphones at a present in Seoul earlier this yr.


Ahn Younger-joon/Related Press

Reminiscence chip costs started falling on the finish of final yr. In contrast with different sorts of semiconductors, reminiscence has the next variety of competing producers, and the chips themselves are much less differentiated from each other, making them extra commoditized and delicate to shifts in demand, stated

Avril Wu,

a TrendForce analysis director who focuses on the reminiscence market.

“Reminiscence is often the primary element to really feel the sting of demand shifts and present worth declines,” Ms. Wu stated.

Reminiscence represents about 27% of the semiconductor business’s estimated income of $619 billion for 2022, a complete that features different main classes of chips like microprocessors and image-sensor chips, based on

Gartner Inc.,

a market researcher. Samsung, SK Hynix and Micron, together with

Intel Corp.

, are among the many business’s greatest gamers by income.

The general chip business flourished via the primary years of the Covid-19 pandemic, as tech demand surged and provide shortages induced costs to skyrocket. This yr, excessive inflation, rising rates of interest and geopolitical tensions have induced greater-than-expected pullbacks in gross sales of things like PCs and smartphones, in addition to demand for videogaming gear.

The strains prolong past reminiscence.

Superior Micro Gadgets Inc.,

pointing to vital weak point within the PC marketplace for its central processing models, decreased its third-quarter income forecast after having issued a subdued outlook earlier.

The mix of AMD’s revenue warning and Samsung’s outlook weighed broadly on semiconductor shares. AMD was down greater than 13% in Friday buying and selling. Graphic-chip maker

Nvidia Corp.

fell greater than 7% and Micron was down greater than 3%. The share declines additionally got here because the U.S. authorities set new restrictions on exports to China.

However among the many various kinds of chips, reminiscence is predicted to see the smallest progress in income of 0.6% subsequent yr, versus an increase of 8.1% for logic chips, 6.4% for analog chips and three.9% for sensor chips, based on forecasts from the commerce group World Semiconductor Commerce Statistics.

One variable that may have an effect on worth actions is whether or not chip makers pull again on manufacturing, which might lower provide. Final week, Japan’s Kioxia Holdings Corp. stated it could lower its NAND flash manufacturing quantity by round 30% ranging from October because it seems to be to “higher handle manufacturing and gross sales.”

Sanjay Mehrotra,

Micron’s chief govt, stated in an interview that his firm was slowing spending on manufacturing to scale back its provide within the brief time period, though the reminiscence market was nonetheless poised to develop strongly within the coming decade. Micron is planning $8 billion value of capital spending in its present fiscal yr, 30% beneath the yr earlier.

Chip corporations anticipate demand to finally come roaring again, pushed by the expansion of synthetic intelligence, autonomous driving, industrial automation and different functions that require huge knowledge processing. On Tuesday, Micron stated it could spend as much as $100 billion on a brand new manufacturing facility in New York that makes DRAM, which helps apps run sooner. Different chip giants like Intel, Samsung and Taiwan Semiconductor Manufacturing Co. are taking a look at making huge investments of their very own.

“We’ll want new DRAM manufacturing capability within the second half of this decade, so choices concerning investments and beginning building should be made now to fulfill rising demand for reminiscence within the second half of this decade,” Mr. Mehrotra stated.

Semiconductor producers Samsung, Intel and Texas Devices not too long ago introduced plans for brand new chip factories within the U.S. WSJ’s Rob Copeland visits Central Texas to be taught why Samsung is transferring to the area and what the sort of reshoring may imply for the American economic system. Photograph Illustration: Adele Morgan.

Final month, Samsung co-CEO and semiconductor enterprise chief Kyung Kye-hyun stated that the corporate’s baseline stance is to decide to regular investments, as underinvesting throughout downturns can harm enterprise as soon as the market recovers.

Samsung and SK Hynix haven’t publicly shared plans for potential output changes. However a senior Samsung memory-business govt stated this week that the corporate is dedicated to a coverage that doesn’t deliberately cut back capability nor does he see an instantaneous must veer from that technique. SK Hynix declined to touch upon the potential of manufacturing pullbacks, although firm executives famous within the firm’s second-quarter earnings name that it could stay versatile in its capital expenditures to handle market circumstances.

Constrained manufacturing within the first half of subsequent yr mixed with an improved demand outlook for the second half—usually a peak season for electronics gross sales round new cellphone launches and the vacations—are elements contributing to much less extreme worth falls on the again half of 2023, Ms. Wu of TrendForce stated.

Corrections & Amplifications
Samsung Electronics Co. forecasts a 32% drop in third-quarter working revenue. An earlier model of this text incorrectly stated the estimated decline was 37%. (Corrected on Oct. 7)

Write to Jiyoung Sohn at and Asa Fitch at

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