Samsung and SK Hynix Plan 20 Percent Price Hike as Yearly Memory Costs Surge 204 Percent Amidst Supply Deficits and US Collusion Lawsuit
The upward trajectory of semiconductor memory pricing continues to climb with no visible peak. Following 2 consecutive quarters of significant upward adjustments, Samsung Electronics is reportedly entering new negotiations with major clients. The manufacturer intends to implement an average price increase of 20% for the 3rd quarter, signaling that the global supply of dynamic random access memory remains severely restricted.
The price hike has been explained by the South Korean media giant ZDNet as being caused by a hard supply bottleneck. Samsung has announced it will be raising the contract rates of server DRAM and mobile low power double data rate memory LPDDR. Both are expected to be increased by over 20 percent in the third quarter. This follows a massive 90 percent leap in the first quarter and a further 50 to 60 percent rise in the second quarter, resulting in an overall price increase of 204 percent over the course of the year. Analysts suggest that Samsung is in a particularly strong bargaining position given the extent of the hardware deficit.
Other industry players will be increasing prices based on market share. SK Hynix will likely implement a slightly smaller rate hike compared to Samsung. The reasoning is that while Samsung dominates the standard DRAM market, SK Hynix has been redirecting a significant part of its capacity toward high bandwidth memory HBM storage for artificial intelligence firms. This reallocation of hardware inventory reduces their proportion of standard DRAM and therefore leaves less negotiating power for standard memory contracts.
Meanwhile, the industry analysts at TrendForce have broken down the expected increases for Micron and others. They have predicted that server DRAM contract prices will climb by between 13 percent and 18 percent in the third quarter due to ferocious demand and thin inventories. Personal computer PC DRAM contract prices are expected to grow by between 15 percent and 20 percent in the same period. However, the price hike is expected to subsequently stabilize in the fourth quarter with increases slowing to between 3 percent and 8 percent, suggesting the upward momentum might start to slow toward the end of the year.
The expectation of such large increases has also caused significant concern within the industry. At the end of June, a legal complaint was filed in the United States courts against these three memory chipmakers. It was alleged that Samsung, SK Hynix, and Micron colluded to limit the global supply of DRAM so as to inflate the cost price. This case may introduce uncertainty into pricing around the time of the next double digit hike.
