Contract price increases boost DRAM's first-quarter revenue by 5.1%

The shipment of DRAM suppliers is expected to see a seasonal rebound in the second quarter.

TrendForce points out that in the first quarter of 2024, the DRAM industry's revenue increased by 5.1% quarter-on-quarter, reaching 18.35 billion US dollars. This growth was mainly due to the rise in contract prices for mainstream products, which was more significant than in the fourth quarter of 2023, driving the revenue growth of most manufacturers in the industry.

The shipment of the top three suppliers all declined in the first quarter, highlighting the off-season effect of the industry, coupled with high inventory levels at downstream enterprises, leading to a significant reduction in procurement volume. In terms of average prices, the top three suppliers continued to benefit from the rise in contract prices in the fourth quarter of 2023, with acceptable inventory levels and a strong desire to raise prices.

Benefiting from the hot sales of Chinese smartphones, the increase in memory required for mobile phones is the highest among all application fields. However, the increase in consumer memory is the lowest, as manufacturers still need to reduce inventory.

TrendForce points out that although consumer demand remains weak, the shipment of main suppliers in the second quarter will show a seasonal rebound. Some PC OEM manufacturers have started to negotiate prices sporadically, with the increase being higher than TrendForce's initial estimate, and the final increase in DRAM contract prices is expected to be about 13-18%.

Advertisement

Samsung's revenue increased slightly to 8.05 billion US dollars, with a quarter-on-quarter increase of only 1.3%. Despite this, its market share fell by 1.6 percentage points to 43.9%. Nevertheless, Samsung still maintains a leading position in the market. The company's strategy of raising the average selling price by about 20% successfully offset the single-digit decline in shipments, showing a clear focus on price rather than quantity.

SK Hynix, ranked second, saw a slight increase in revenue to 5.7 billion US dollars, with a quarter-on-quarter increase of only 2.6%, and its market share fell by 0.7 percentage points to 31.1%. The average selling price also increased by about 20%, offsetting the single-digit decline in shipments, a strategy similar to that of Samsung.Micron's first-quarter revenue grew to $3.95 billion, a sequential increase of 17.8%, with an impressive performance, and its market share increased by 2.3 percentage points to 21.5%, securing the third position. The average selling price increased by about 23%, while shipments only declined by 4-5%, outperforming the top two competitors. This is mainly due to Micron's aggressive pricing strategy and the benefit of large orders from American clients, with strong shipments of server DRAM.

For the second quarter, the shipment forecasts for the three major manufacturers are as follows: Samsung is expected to grow by a low to high single digit, SK Hynix is expected to grow by a mid-single digit, and Micron is expected to see a slight decline in shipments.

In terms of Taiwan manufacturers, Nanya Technology's first-quarter shipments benefited from the price increase driving replenishment momentum, coupled with a slowdown in the recovery of consumer DRAM sales, resulting in a low single-digit percentage growth in shipments, a high single-digit increase in average selling price, and a 10.5% increase in revenue, reaching $302 million.

In the first quarter, although Winbond did not raise contract prices, it benefited from customers' advance stocking, leading to a strong shipment performance, which drove a 21.6% increase in revenue, reaching $162 million. As for Powerchip, the revenue calculation mainly includes its own consumer DRAM products and does not include DRAM foundry business.

Despite the gradual recovery of utilization rates, DRAM revenue in the first quarter decreased by 28.2% to $28 million. This is due to the main shipment of low-priced DRAM products and a reduction in the number of shipping days.

According to the latest report from Morgan Stanley, the global memory market will face an unprecedented supply-demand imbalance in 2025, driven mainly by the rapid development of artificial intelligence technology and the insufficient capital expenditure in the memory industry over the past two years.

The report forecasts that the supply shortage rate of HBM (High Bandwidth Memory) will reach 11% in 2025, while the overall DRAM market will have a supply shortage rate as high as 23%. In particular, the demand for HBM is expected to increase significantly, potentially accounting for 30% of the total DRAM supply.

This supply-demand imbalance situation indicates a significant increase in memory prices. The report points out that the prices of commodity storage products will rise at a double-digit rate per quarter in 2024, and the price of HBM will be even higher in 2025, with server DRAM and ultra-high-density QLC solid-state drives leading this price increase trend.

This "super cycle" in the memory market will bring further growth in market share for strategic companies in the industry, such as SK Hynix and Samsung. Morgan Stanley has raised its earnings per share forecasts for these two companies for 2024-2025 by 24%-82%, which is 51%-54% higher than the latest consensus expectations.SK Hynix is expected to capture the largest market share in the High Bandwidth Memory (HBM) market by 2025, with its stock target price raised by 11% to 300,000 Korean won, while Samsung Electronics' target price is increased to 105,000 Korean won.

This round of the super cycle in the memory market is different from the past, as the industry's capital expenditure in the current cycle is far below the level required to maintain production capacity, and production has been declining since the third quarter of 2022.

This lack of investment is occurring as the memory supply chain is rapidly shifting to HBM, which requires twice the wafer capacity per bit compared to regular DRAM, and its production yield is also lower, further exacerbating the supply and demand imbalance.

In addition to DRAM products, the strong global demand for AI has kept the demand for server eSSDs, DDR5, and HBM robust, especially as AI servers actively adopt high-performance storage to enhance overall system performance and optimize energy efficiency. The transition to NAND process and the iteration of DDR5 products also keep the supply and demand of server-side storage relatively tight, supporting the steady rise of the server-side storage market. At the same time, original manufacturers such as Samsung, SK Hynix, and Micron are actively converting or increasing the production of high-profit HBM, continuously squeezing the capacity of traditional storage chips. However, there is no significant increase in demand for PCs and mobile terminals, and the cost pressure on consumer terminal hardware is considerable, which means that the sales volume and price increase of storage for PCs and mobile terminals are limited, and the trend of related storage markets depends more on the supply side's trade-off between profit and market share.

The significant growth in the global storage market size this year mainly depends on the sharp rise in storage prices in the first half of the year and the recovery of the global server market this year, bringing a positive impact on the increase in both the quantity and price of server storage.