Is the price of storage chips really going to rise as major manufacturers continue to "leak" information?

Recently, several media outlets have reported that the price of storage chips has hit bottom and major international manufacturers like Samsung have started raising prices. According to interviews conducted by Shanghai Securities News, in the context of continuous production cuts by international storage giants such as Kaxia and Micron, the supply of storage chips has decreased, prompting major storage manufacturers to issue price increase notices for the fourth quarter to downstream customers. Currently, the expectation of price increases is mainly focused on the DRAM (Dynamic Random Access Memory) chip sector, as the NAND (flash memory) storage chips still have high channel inventory and have not yet seen any room for price increases. Several A-share companies have also informed reporters that their NAND products have not seen any price increases and are unable to raise prices.

In fact, after experiencing five consecutive quarters of adjustment, the entire storage industry is expected to rebound, and it may only be a matter of time before a phenomenon-level application emerges.

Manufacturers Start Calling for Price Increases, Driven by Production Cuts

"It is true that prices have increased, but mainly for DRAM chips; NAND chips have no room for price increases due to high channel inventory levels," said an insider from an international chip company in response to the price increase rumors.

According to media reports, downstream manufacturers have recently received notices from storage manufacturers that contract prices will be raised in the fourth quarter, with contract prices for NAND flash memory possibly increasing by 10-20% and DRAM contract prices increasing by about 10%.

It is understood that Yangtze Memory Technologies Co., Ltd. announced a price increase last month, and major global storage manufacturers have now begun issuing notices of price increases for the fourth quarter. Some module manufacturers have already felt the impact of upstream chip price increases, but this has not yet been passed on to end customers.

"Some downstream application areas have shown some signs of recovery, but overall, the situation is still relatively sluggish," said the insider from the international chip company, adding that the driving force behind this round of price increases by international storage manufacturers is mainly due to their own supply-side production cuts and adjustments to channel inventory structure.

From the end of 2022 to early 2023, major storage manufacturers have proactively initiated production cuts, with Kaxia, Micron, Samsung, and other international storage giants gradually reducing production. However, reducing production and lowering channel inventory takes time and is a process, and coupled with the continued weak demand from downstream, the news of storage chip price increases is often short-lived.

Urgent Orders Are Indeed Numerous, But Recovery Is Still Uncertain

In general, price increases are often due to supply shortages. Are storage manufacturers calling for price increases because of strong downstream demand and industry recovery? Some manufacturers interviewed expressed that even if they sell out of stock, it is still difficult to assert a recovery in demand.

"Downstream demand is indeed good, but it mainly comes from urgent orders from overseas, and these isolated phenomena do not represent an industry-wide recovery," said a representative from a domestic storage company, adding that in previous years, this would already be the peak season, with industries such as network communications and security starting large-scale stocking, and the company's shipments would have multiplied. However, this year, such phenomena are not yet visible.

Another executive from a storage company also told reporters that demand for low-end products is indeed good, but it is difficult to raise prices for small-capacity storage like NAND. "There are many competitors, and as long as you raise prices, there will always be low-priced products to fill your market," he said.

It should be noted that "demand seems good" is not only reflected in the storage industry. "Our products are currently in high demand, but we dare not assert that downstream demand has recovered." An executive from a power management chip company stated in an interview that there are no long-term orders at the moment. Instead, customers are requesting urgent orders, such as bringing forward shipments expected in October to September. This situation is prevalent throughout the industry, giving the appearance of a busy scene. However, many believe that customers may just be replenishing their inventory.

The Game Continues: Demand Determines the Outcome

Since the second half of 2022, the global semiconductor industry has entered a downturn. During this downward trend, prices of storage products have dropped significantly. However, when the industry enters a new upturn cycle, storage product prices are likely to rebound first. So, can storage chips increase in price as expected by the industry in the fourth quarter?

"The industry is still in a game between chip manufacturers and downstream players, and the ultimate determinant of price trends is downstream demand." A representative from a major international storage manufacturer stated that if the downstream market for DRAM can accept price increases, investors can continue to be optimistic about the storage market next year. However, if demand remains sluggish, even if DRAM manufacturers continue to reduce production, it may not drive price increases.

Compared to DRAM, the outlook for price increases in NAND is even less optimistic.

"We have not increased prices, and we will not do so for now." Several domestic memory chip companies told reporters that a few international giants such as Samsung, Micron, and SK Hynix control the global supply of DRAM. In contrast, there are more suppliers in the NAND chip field, and the market is more competitive. It is expected that it will take at least six months to determine whether there is room for price increases.

A representative from Puran Technology told reporters that the company has indeed seen a sustained mild recovery in downstream consumer demand, and the company's shipments have also been improving. However, product prices are still at a bottoming stage.

However, there is also a bright spot in the NAND field. A representative from Dongxin Technology stated that with the gradual construction of 5G base stations and the upgrading demand for performance and capacity brought by various 5G applications, the company's medium to high-capacity SLC NAND products will find more and more applications. In the future, the company still has significant market expansion opportunities in the field of network communications.

Author: Li Xingcai, Source: Shanghai Securities News, Original Title: "Will the Price of Storage Chips Really Increase as Major Manufacturers Keep 'Leaking' Information?"