Semiconductor Supercycle Debate: Boom or Bust?
- 5 years ago
Semiconductors became South Korea's first single export goods to top 100 billion U.S. dollars last month..
But memory chip prices dropped in October,.... fueling debate on whether semiconductors have indeed reached the peak of their supercycle.
Our Kim Hyesung explains.
Semiconductors account for a fifth of South Korea's total exports, a quarter of all South Korean companies' earnings and have driven the country's economy in recent years.
But prices of DRAM, chips used to store data and programs, fell over ten percent on-month to seven dollars 30 cents in October.
NAND flash prices also fell,....raising concerns prices have reached their peak and are set to fall further.
"The semiconductor industry has a supercycle where prices go up and down based on demand and supply. Prices have doubled over the last two years on soaring demand but now with the global economy slowing down, and IT companies including Amazon and Facebook cutting data center investment, demand for chips and therefore prices are going to go down."
On top of that, China, which purchases more than 60 percent of global semiconductors, announced last week that there's been progress in its anti-monopoly investigation into three key chipmakers, Samsung Electronics, SK Hynix, Micron Technology, which could end up pressuring prices.
On the supply front, China is also expected to mass produce its own chips next year under its Made in China 2025 plan.
But regardless, other experts argue the semiconductor boom is here to stay.
"Unlike the previous supercycle of boom and bust, global chipmakers now have huge production capacities and can cut manufacturing volume in order to counter plunging prices. Demand for chips will actually go up, not from PCs or data servers, but from IoT consumer goods products, AI and 5G networks...so the demand and supply balance will correct itself."
In addition, the ongoing U.S.-China trade spat could give South Korean chipmakers time to invest and innovate so they can stay ahead of Chinese companies, with Washington banning semiconductor components from being exported to Chinese state-owned company Fujian Jinhua, citing security concerns.
In the end what matters now for South Korean companies, experts say, is to keep innovating and nurturing talent to develop high end memory chips that will be in high demand in the near future.
Kim Hyesung, Arirang News.
But memory chip prices dropped in October,.... fueling debate on whether semiconductors have indeed reached the peak of their supercycle.
Our Kim Hyesung explains.
Semiconductors account for a fifth of South Korea's total exports, a quarter of all South Korean companies' earnings and have driven the country's economy in recent years.
But prices of DRAM, chips used to store data and programs, fell over ten percent on-month to seven dollars 30 cents in October.
NAND flash prices also fell,....raising concerns prices have reached their peak and are set to fall further.
"The semiconductor industry has a supercycle where prices go up and down based on demand and supply. Prices have doubled over the last two years on soaring demand but now with the global economy slowing down, and IT companies including Amazon and Facebook cutting data center investment, demand for chips and therefore prices are going to go down."
On top of that, China, which purchases more than 60 percent of global semiconductors, announced last week that there's been progress in its anti-monopoly investigation into three key chipmakers, Samsung Electronics, SK Hynix, Micron Technology, which could end up pressuring prices.
On the supply front, China is also expected to mass produce its own chips next year under its Made in China 2025 plan.
But regardless, other experts argue the semiconductor boom is here to stay.
"Unlike the previous supercycle of boom and bust, global chipmakers now have huge production capacities and can cut manufacturing volume in order to counter plunging prices. Demand for chips will actually go up, not from PCs or data servers, but from IoT consumer goods products, AI and 5G networks...so the demand and supply balance will correct itself."
In addition, the ongoing U.S.-China trade spat could give South Korean chipmakers time to invest and innovate so they can stay ahead of Chinese companies, with Washington banning semiconductor components from being exported to Chinese state-owned company Fujian Jinhua, citing security concerns.
In the end what matters now for South Korean companies, experts say, is to keep innovating and nurturing talent to develop high end memory chips that will be in high demand in the near future.
Kim Hyesung, Arirang News.