01

In November, South Korea's chip exports increased by $9.5 billion

In December, according to the latest news, the condition of the global chip market is also improving, driven by rising prices, increasing demand in the field of artificial intelligence, and large shipments of new smartphones launched by major manufacturers. South Korea, home to two major memory chip makers, Samsung Electronics and SK Hynix, saw its exports improve in November. Data from South Korea's Ministry of Trade, Industry and Energy reported that chip exports in November were $9.5 billion, up 12.9 percent from a year earlier, the first year-on-year increase after 15 months of decline since August last year. Chips account for about 20 percent of South Korea's overall exports, and the increase in exports of this category will push up South Korea's overall export situation. Data from South Korea's Ministry of Trade, Industry and Energy show that their exports rose 7.8 percent year-on-year to $55.8 billion in November, the second consecutive month of year-on-year growth.

02

SK Hynix overtook Samsung in server DRAM market

According to TrendForce statistics, SK Hynix held the No. 1 position in the server DRAM market with 49.6% market share in the third quarter, with sales of $1.85 billion. Samsung Electronics ranked second with $1.313 billion in sales and a 35.2% market share, followed by Micron with $560 million in sales and a 15.0% market share. The market share calculation does not include high bandwidth memory (HBM), which is mainly used for artificial intelligence (AI) servers, and the gap between SK Hynix and Samsung Electronics is expected to be even wider if HBM is included. Server DRAM accounts for approximately 35% to 40% of the overall DRAM market, and SK Hynix's market share in server DRAM has surged ahead of Samsung Electronics, mainly due to SK Hynix's leading position in the module category, including the latest standard server DRAM and fifth-generation double data rate memory (DDR5).

03

Domestic storage to achieve new breakthroughs

Since the beginning of this year, domestic enterprises have made new breakthroughs in the two major memory chip categories (DRAM and NANDFlash). On November 28, Changxin Storage officially launched LPDDR5 series products, including 12Gb LPDDR5 particles, 12GBLPDDR5 chips packaged by POP and 6GBLPDDR5 chips packaged by DSC.

Changxin Storage said that the 12GB LPDDR5 chip has been verified on brand models such as Xiaomi and Transtone, the mainstream mobile phone manufacturers in China. LPDDR5 is a product launched by Changxin Storage for the middle and high-end mobile device market, and its market landing will further improve the product layout of Changxin memory DRAM chips. The DRAM chip market has been mainly dominated by Samsung, SK Hynix and Micron three overseas memory manufacturers, Donghai Securities in September this year published a research report pointed out that in the second quarter of 2023, Samsung Electronics accounted for 38.14% of the global DRAM market revenue, SK Hynix accounted for 32.29%. Micron's market share also reached 25.03%, and the market is highly concentrated. The oligopoly pattern makes the bargaining power of domestic manufacturers for DRAM chips very low, and also makes DRAM chips one of the basic products subject to the most serious external constraints in China. DDR5 is a high-efficiency memory for mobile phones and portable devices, compared to the previous version, it transmits data faster and consumes less power, Changxin Storage launched the first domestic high-end DRAM products, which is a good news for the current industry chain that needs to recover. In the field of NANDFlash, in September this year, the only retail storage brand of the Yangtze River Storage, the state released a Ti600 solid-state drive, which uses the original QLC flash memory particles of the Yangtze River Storage, based on self-developed architecture, sequential reading speed of up to 7000MB/s. Available in 500GB/1TB/2TB capacity options. Liu Shuwen, head of the Changjiang Storage mode product line, said at the time that the performance and life of QLC flash memory chips were continuously optimized, and solid-state drives using them as storage media began to enter the retail market. CFM flash market analyst Dai Xiaoyu said, "NANDFlash technology is developing into a form that can stack 200 or more layers, which means storage devices can hold more data. At the same time, DRAM memory technology is also advancing, making chips smaller in size (less than 1 beta nanometers), making them more efficient. In both areas, domestic players are making a push for technology leadership." However, in the current situation of limited access to advanced process production equipment, the future expansion of domestic memory chip process production capacity of more than 200 layers needs to be completed through the technological breakthrough of domestic semiconductor equipment manufacturers. Due to the late start of the domestic memory chip industry and the lack of technology accumulation, most domestic manufacturers are focusing on the niche market and competing with the storage three giants. In recent years, representative memory chip design and manufacturing enterprises such as Zhaoyi Innovation, Yangtze River Storage, Changxin storage, Wuhan Xinxin, etc. Are gradually breaking through technical barriers in the field of DRAM and NANDFlash, domestic brands will continue to stir the competitive landscape of the global memory chip market in the future.

04

Production cuts, destocking and price increases

As mentioned at the beginning of this article, the storage market has been following a pattern of development. The main reason is that its inventory control can not be accurate, when the market is good, the inventory increases, when the market depression or sharp decline, the entire market began to reduce production and inventory. That will be the case in 2023. After a brief spike in demand, the pandemic ended, and the ensuing market slump led to production cuts and widespread destocking. Samsung Electronics' third quarter report shows that the company's memory chip business achieved revenue of 10.53 trillion won, a 31% decrease year-on-year, and the semiconductor business unit (DS department), including the memory chip business, posted a net loss of 3.75 trillion won in the third quarter. In the third quarter of fiscal 2023, SK Hynix achieved revenue of 9.0662 trillion won, operating loss of 1.79 trillion won, and net loss of 2.19 trillion won; Micron Technology's fourth fiscal quarter 2023 data showed that it achieved revenue of $4.01 billion in the quarter, a decrease of 39.64% from the same period last year, and a net loss of $1.43 billion. In A shares, the main listed storage companies, the third quarter performance is not ideal. Zhaoyi Innovation (603986.SH) achieved revenue of 4.394 billion yuan in the first three quarters of 2023, a year-on-year decrease of 35.08%, and achieved net profit of 434 million yuan, a year-on-year plunge of 79.27%; Baiwei Storage (688525.SH) revenue in the first three quarters of 2023 was about 2.22 billion yuan, a decrease of 2.88% year-on-year, and a net loss of about 484 million yuan to the mother; Jiangpolong (301308.SZ) achieved revenue of 6.579 billion yuan in the first three quarters of 2023, down 0.73% year-on-year, and net loss of 883 million yuan to the mother. Samsung, SK Hynix, Micron, Gaoxia and Western Data five original factory total losses, from Q1 loss of $10 billion to Q2 loss of $8.5 billion to Q3 loss of $6.5 billion, a cumulative loss of $25 billion. According to CFM flash market statistics, at present, the major storage original NANDFlash production reduction is about 30%-50%, especially the mature process products with relatively large production capacity, the major factories are also cautious about the capital expenditure and production capacity release next year, and need to adjust flexibly according to the inventory level and profitability. Jibang Consulting analyst Ao Guofeng said that the production reduction of international storage manufacturers mainly focuses on eliminating excess memory chip inventory in the market and preventing memory chip prices from declining further. Now, the move has had an effect in the fourth quarter, and flash memory chip products have rebounded fully in the quarter. Recently, there is market news that Samsung Electronics has signed a purchase contract with major customers, and in the fourth quarter will increase the contract price by 10%-25%, of which the highest price adjustment of SSD products, the contract price increase of up to 30%, SK Hynix also announced in October that it will increase the price of DRAM and NAND flash memory chips. Micron Technology has also been exposed to follow up on price adjustments. According to IDC research data, the overall PC market sales increased by 1.4% between October 23 and November 3, 2023 compared to the same period last year. In addition, the tablet market sales increased by 13.5% year-on-year, the mobile phone market sales increased by 10.2% year-on-year, the display market sales increased by 5.3% year-on-year, the smart watch (excluding children's watch) market sales increased by 23.6% year-on-year, and the bracelet market increased by 15.2% year-on-year. IDC pointed out that during the "double 11" period this year, the demand for PC, mobile phone and tablet three mainstream consumer electronic terminals has achieved more than expected growth, which is also one of the main reasons for driving the overall smart terminal market. At the same time, the three major application markets of servers, smartphones and PCS rebounded in the second half of the year, but the decline in storage prices also accelerated the growth of the average capacity of terminal equipment, bringing about a rise in storage prices.

05

Summary and prediction

In terms of smartphones, shipments for the full year 2023 will reach 1.13 billion units and are expected to grow by 4% to 1.17 billion units by 2024, according to Canalys' forecast. The smartphone market is expected to reach 1.25 billion units shipped by 2027, with a compound annual growth rate (2023-2027) of 2.6%. Also according to the latest report released by Canalys, global PC shipments are expected to return to 5% year-on-year growth in the fourth quarter of 2023 after seven consecutive quarters of decline. Canalys analyst Ben Yeh believes that the global PC market is on the road to recovery and will return to 2019 shipment levels by next year. On the server side, as AI continues to heat up, DIGITIMES predicted mid-year that high-end AI server shipments will reach 337,000 units in 2024, and that the generative AI market will reach $109 billion by 2030, with a compound annual growth rate (CAGR) of 35%. With the effect of production cuts, supply and demand may reach balance in the short term. Zhaoyi Innovation management said: the price of large storage is expected to continue the rebound trend, this rebound has a certain driving effect on niche storage, niche storage prices are also building a bottom and have a weak rebound, but it is unlikely to rise and fall. The recovery of smartphones, PCS, and the substantial growth of servers are directly beneficial to the storage industry, and the storage industry may usher in a turnaround in 2024.

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