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DRAMeXchange, a division of TrendForce, has just released contract prices for various products in July, in which we see contract prices still trending down overall, but those for mainstream products shrinking due to the Toshiba outage directly impacting production. Furthermore, Japan's modifications to South Korean-bound export regulations were also anticipated by the market to impact South Korea's NAND Flash supply. TrendForce suggests that Japan's move was merely the removal of South Korea from its white list, in which countries to receive favorable treatment were listed and with South Korea as the only Asian country listed in the past. South Korea will merely turn from a country receiving special treatment into a normal one, and South Korean semiconductor suppliers will have to go through the same proceedings as other Asian countries do. And since the Japanese government has already assigned additional personnel to speed up reviewing, this move probably won't be causing much of an impact.
DRAMeXchange, a division of TrendForce, finds that although spot prices have increased by 24% on average since the start of July, the scale of the spot market is too small to relieve suppliers of their high inventory levels by any noticeable amount. Furthermore, end demand for memory products saw no improvement entering peak-season, putting contract prices on the slide yet again. Contract prices for market mainstream DDR4 8GB products have come to US$25.5, a 10.5% decline MoM from US$28.5.
Investigations by DRAMeXchange, a division of TrendForce, show peak season demand growth and, in turn, production volume growth for the smartphone market in 3Q weakening in comparison to previous peak-seasons, for which production volume growths of 10% QoQ and above were the norm. The decline for total smartphone production this year is forecast to remain near 5%. Pull-ins have slowed in 1H, and we see suppliers yet to fully clear their large levels of inventories. Despite the Japan-South Korea incident over material exports, which resulted in rumors of price trend reversals circulating in the market, pressure to clear inventories still remained high. Adding the fact that though some DRAM suppliers have announced plans to reduce production capacity, the actual extent of those reductions were generally low,consisting mostly of capacity reductions for older processes or capacity reductions as a result of process switching. Until mainstream products become unprofitable, DRAM suppliers are unlikely to make large reductions to capacity. And though prices in spot markets have seen slight fluctuations, contract prices remain on a downwards trend overall.
DRAMeXchange, a division of TrendForce, points out that after the Toshiba outage in mid-June, the Japanese government announced that it will be controlling South Korea-bound exports of three key materials used in the manufacturing of semiconductors, smartphones and panels, causing module manufacturers in the memory industry downstream to give higher quotes. However, since DRAM and NAND Flash inventories remain high, and that this is not a complete barring of materials but a prolonging of procedures, the possibility of a short-term, structural reversal of supply and demand is low.
According to TrendForce’s latest report, current RF front end component manufacturers are gradually turning to GaAs chips as their main material of choice, according to the functional requirements of the phone component in question. As 5G becomes more and more widespread, the number of RF components used will double compared to that of the 4G era. Both of these factors are expected to herald a new period of growth for the GaAs RF component market beginning from 2020.