According to Korean media reports, many sources recently revealed that,Samsung internally believes that the current supply price of NAND Flash is too low. The company plans to increase the contract price of NAND Flash products by more than 10% starting from the fourth quarter of this year. It is expected that new contracts will adopt the new price as soon as this month.
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Since the beginning of this year, Samsung has been pursuing a production reduction strategy, and has successively announced adjustments to wafer investment in January and April. The initial production reduction measures were mainly focused on the DRAM field. Later in the second half of the year, Samsung began to significantly reduce the production of NAND Flash business and is now trying to normalize NAND prices.
Nowadays, DRAM prices have rebounded, but NAND products still have room for breakthrough. Samsung's goal is to expand the scale of production cuts, reduce supply, and then increase product prices to seek reversal. It hopes to achieve the NAND break-even point in the second quarter of next year.
SK Securities researcher Han Dong-hee believes that,Samsung’s second wave of production reduction plans and profit-priority policy are expected to drive a rebound in memory chip prices.
It is worth mentioning that Samsung has signed memory chip supply agreements with customers (including Xiaomi, OPPO and Google) in September, and the prices of DRAM and NAND flash memory chips have increased by 10%-20% compared with the previous contract price. Samsung Electronics predicts that the memory chip market may be in short supply from the fourth quarter.
In addition, the original manufacturer has recently notified downstream manufacturers that it will increase the contract price in Q4. Different products have different increases, but the increases are almost at double-digit levels. Among them, the contract price of NAND Flash Q4 is expected to increase by 10% to 20%, and that of DRAM is expected to increase by approximately 10%.
In early October, Chen Libai, chairman of ADATA, said,The memory chip industry has been struggling for two years, and the darkness is about to pass, and shortages are more likely to occur in the second half of 2024. He believes that as the three major memory chip giants actively reduce production, the benefits are beginning to appear, and the recent spot prices of NAND and DRAM have rebounded by double digits from the trough.
Buyers and sellers in the industry are currently negotiating contract prices. Chen Libai estimates that the contract prices of DRAM and NAND Flash will increase by 10%-15% in the fourth quarter. Samsung even plans to increase the price by 20%. The transaction price remains to be seen.
From the perspective of the supply side of the industry, CITIC Securities predicts that the growth rate of industry supply will be lower than the growth rate of demand in 2023, and supply and demand will gradually reach a balance, which will help inventory repair. It is optimistic that the storage sector cycle will bottom out in the second half of 2023. On the demand side, terminal manufacturers are currently in the late stage of destocking, and shipments throughout the year are expected to show a low first and then a high. We are optimistic about the recovery trend of downstream demand from the second half of 2023 to 2024.
Generally speaking, analysts expect that demand will gradually return as inventory is reduced in the second half of the year, and industry segment leaders are expected to usher in performance recovery opportunities. They are optimistic about investment opportunities under the cyclical recovery of the domestic storage industry chain and the localization trend. It is recommended to focus on: 1) storage modules; 2) storage chip design; 3) storage supporting chips.