Samsung Electronics announced that it achieved memory revenue of 13.26 trillion won (USD 11.48 billion) in Q3 2019, up 7.8% sequentially, but down 37% year on year, mainly due to the weak memory market.
Unlike other memory companies that are planning on reducing memory CAPEX in 2019 and 2020, Samsung’s 2019 Capex will reach 23.3 trillion won (~USD 20 billion), which is at a similar level to that of 2018. The accumulated investment in the first three quarters was 16.8 trillion won and will invest the other 12.2 trillion won in the fourth quarter. Most of the remaining CAPEX in 4Q will be used to build memory infrastructure, including the second phase of Samsung’s fab in Xi’an’s and Pyeongtaek. Both are expected to be in mass-production in 2020 to meet the mid- to long-term demand. It is in line with Samsung’s long-term strategy to increase investment as the market cycle reaches the bottom.
Exhibit one is Counterpoint’s estimate of revenue for both DRAM and NAND. Exhibit 2 shows our estimate for bit shipment and ASPs of both.
Exhibit 1: Historical revenue of both DRAM and NAND flash, 1Q18-3Q19
Exhibit 2: Historical bit shipment and ASPs of both DRAM and NAND flash, 1Q18-3Q19
Samsung will continue to drive the technology conversion of both DRAM and NAND to reduce the production costs and widen the gap to its other competitors.
The percentage of Samsung’s 1Xnm DRAM capacity will be close to 80% by the end of 2019; higher than other players. Also, the next 1y-nm DRAM will become mainstream in the first half of 2020.
From the perspective of NAND flash, Samsung is also converting 96-layer fifth-generation V-NAND technology to the 136-story sixth-generation V-NAND, which can increase the bit density and reduce the cost of a single-chip.
Samsung expects bit consumption of both DRAM and NAND in smartphones will both increase because 5G smartphones will increase the demand for high-density and low power DRAM.
The recovery of the data center and the launch of new CPUs from Intel will both drive high-density, and high-performance SSDs. At the same time, the adoption rate of SSDs in PCs will also increase steadily.
The inventory of both DRAM and NAND continues to drop. However, DRAM inventory may increase again as Chinese manufacturers start to build inventory to avoid being impacted by trade wars.
Although the demand for both DRAM and NAND is gradually increasing, Counterpoint expects that the ASPs of both will still see a mild decline in 4Q 2019. However, prices are expected to rebound from the 1Q 2020 because of pre-orders for Chinese New Year and the release of new 5G smartphones. The inhibitors to higher prices, however, are the pre-established chip inventory by Chinese companies.
Counterpoint suggests memory vendors carefully check whether smartphone OEMs have placed double orders. Also, they should understand the operating conditions of OEMs via Counterpoint’s tracking services to mitigate the risk of oversupply and excessive inventory.
