Samsung‘s recent accounts for the second quarter have revealed a concerning trend as the company continues to face operating losses, primarily due to declining memory sales. However, a glimmer of hope lies ahead, thanks to the growing demand for Samsung’s RAM memory fueled by artificial intelligence applications.
Over the past few months, Samsung, along with SK Hynix and Micron, faced reduced prices for RAM memory chips due to a combination of low demand following the pandemic and an excess inventory. In response, the three companies reportedly agreed to curtail production to regain control over the market, leading to a stabilization of prices.
As we move forward, the situation appears to be heading towards normalization, and further downward price adjustments are not anticipated for the coming quarter. Instead, a moderate increase of no more than 5% is expected. However, the real impact is likely to be seen in 2024, when a more substantial increase in RAM memory prices, as well as SSDs, is projected.
Artificial intelligence to the rescue
The technology industry has seen its fair share of trends over the years, from 3D printers to graphene and tablets, among others. Currently, artificial intelligence (AI) appears to be the latest fashion in the tech world, and companies like Samsung are embracing it as a lifeline for their growth.
Samsung’s recent accounts presentation highlighted that DRAM shipments have surpassed expectations, thanks to the high demand for various artificial intelligence systems. This surge in demand for AI applications has resulted in improved performance in the memory business, particularly in products like HBM and DDR5.
However, contrasting statements have arisen from other players in the industry. TSMC, the world’s largest chipmaker, recently revised its annual sales guidance, warning of cost challenges due to lower demand for chips.
Furthermore, IDC Research Director Nabila Popal has expressed concerns about the overall economic recovery, indicating that it might be further delayed in the second half of the year, affecting the technology sector.
As the tech industry navigates through these dynamics, it becomes clear that artificial intelligence is gaining momentum and impacting the business strategies of major companies like Samsung, while other players face challenges and uncertainties in the market.
How will this affect us?
In a nutshell, the equation is straightforward: when demand outstrips production, prices are bound to rise. Recognizing this, Samsung, SK Hynix, and Micron have recently scaled back their production to create an upward price trend. The substantial increase in demand signifies a potential supply shortage, which inevitably results in price hikes.
Even before these data emerged, discussions were already underway about a predicted 3-5% price increase after summer. It is plausible that the price of RAM memory will remain steady until the year’s end. However, what cannot be ruled out is a more pronounced surge in prices for the following year, largely driven by the surging demand for artificial intelligence applications.