Samsung and SK Hynix Set Server DRAM Price Increases of 70% at Most
Samsung Electronics and SK Hynix have set first-quarter supply prices for server DRAM to global cloud providers at levels that are 60-70% higher than the fourth quarter of last year. Such moves are signaling a drastic shift on the supplier advantage front for a fast-growing artificial intelligence hardware application.
Factors Driving up Price
The steep escalation of server DRAM prices is mainly due to two reasons:
- Prioritization on HBM3E Production: Both companies are focusing on HBM3E production because of mass orders for this new memory from AI accelerator companies like Nvidia and Broadcom, thus limiting production for standard server DRAM.
- Heights of Inference AI: Large technology companies are now starting to expand their inference-based AI services like Gemini and Copilot. This increased demand for general-purpose server DRAM has been putting further strain on supply.
Market Reaction and Supply Strategy
The impetus for action from those large multinational technology politicians reportedly extends even to purchasing staff within Amazon, Google, Apple, and Dell, as employees have been said to stay in Korea to help secure supply. These representatives visit Samsung and SK Hynix installations daily in a bid to conclude long-term agreements (LTAs) for two to three years.
All the same, it looks like Samsung and SK Hynix have turned down these types of LTA negotiations and preferred quarterly contracts instead, which is a tactic they now employ to capitalize on prices that are expected to increase year on year up to 2027 for DRAM.
Financial Predictions and Implication on Economy
The upsurge in the memory market shall, indeed, get many global investment banks raising their earnings forecast by great margins. Citigroup particularly said that operating profit for Samsung Electronics may reach 155 trillion won this very year, while Morgan Stanley would say 148 trillion won for SK Hynix. According to the market research firm DRAMeXchange, server DRAM contract prices will increase by 60-65% in the first quarter, with some analysts estimating that average selling prices may hike by 144% year over year.
The buoyant forecast for the chipmakers already rocked the stock market, as the KOSPI index closed out at a historic high of 4,457.52 lifted by gains in Samsung Electronics and SK Hynix stock.
Impact on Device Manufacturers
This spike in memory costs comes at a heavy cost for server, PC, and smartphone manufacturers alike. In fact, it is claimed that memory composition in smartphone production costs alone has gone from the previous 15% to over 20%.
In response, companies like Xiaomi, Oppo, Vivo, Dell, and HP have decided to increase their prices vis-a-vis the high costs of memory. Samsung is under pressure as well; according to the head of Samsung's mobile division, Noh Tae-moon, the global shortage of memory is slowing down the profitability of its smartphone business.
