Samsung Forecasts Stable Chip Prices, Pressuring Rivals

Strategic Insights -

Samsung Electronics Co, the world's largest maker of computer memory chips, predicts that prices of semiconductors will remain stable, a trend that will continue to put pressure on smaller rivals. According to Kwon Oh Hyun, head of Samsung's chip division, there won't be a "drastic rebound" in prices for chips used in personal computers. Samsung's chip business is on track to meet its capital expenditure plan for this year, as the company widens its lead over competitors. The Suwon, South Korea-based company is one of only three DRAM makers among the top eight generating profit from selling the memory devices used in computers to run multiple programs simultaneously.

Key Takeaways:

  • Samsung forecasts stable chip prices for personal computers, with no drastic rebound expected.
  • The company's chip business is on track to meet its capital expenditure plan for this year, as it widens its lead over competitors.
  • Samsung is one of only three DRAM makers among the top eight generating profit from selling the memory devices used in computers to run multiple programs simultaneously.
  • The company is exploring opportunities in areas with growth potential, but has no plans to acquire a DRAM maker.
  • Samsung has begun operations at a new 12-trillion won ($10 billion) factory in Hwaseong, outside Seoul, which has the industry's largest capacity.
  • The company plans to further shrink its chips to less than 20 nanometers next year while increasing output of NAND flash memory.
  • Weak demand and a cost gap between first-tier and second-tier manufacturers are ongoing challenges for the industry.
  • Some chipmakers, such as Nanya Technology Corp and Inotera Memories Inc, have cut production of DRAM due to a glut.

Statistics:

  • The price of the benchmark DDR3 2-gigabit DRAM has slumped more than 70% over the past 12 months as PC sales slow.
  • The price of DRAM climbed for the first time in six months in September with a gain of more than 7%, according to data from Dramexchange Technology Inc.
  • Samsung controls about 40% of the DRAM market.
  • The new factory in Hwaseong has a capacity of 12 trillion won ($10 billion).
  • The company plans to further shrink its chips to less than 20 nanometers next year.

Sources:

  • Bloomberg News (via email)
  • Nomura Holdings Inc. (September 21 report)
  • Dramexchange Technology Inc
  • Taipei-based Dramexchange Technology Inc
  • Nanya Technology Corp (September 14)
  • Inotera Memories Inc. (September 14)
  • Elpida Memory Inc.
  • I Media LLC 2011