Samsung’s Q3 financial results are signaling that the bottom of the memory chip market has already occurred, paving the way for a recovery in 2024.
Based on Samsung’s preliminary guidance, company revenue fell by an estimated 12% in Q3 compared to a year earlier. Although operating profit dropped by 78.7% on a year-on-year basis, this decline represents a considerable improvement from the record 95% year-on-year plunge during Q2.
With the Market at The Bottom, the Only Way to go is Up
Samsung guidance matches the Commodity IQ analysis for DRAM presented in May and June, showing Q3 demand declined at a decelerated rate compared to Q2. The Commodity IQ Demand Index memory was below the baseline in Q3, indicating further contraction in sourcing activities. However, the index rose by 11% sequentially in Q3, moving closer to growth territory.
Following a major drop in demand during the first nine months of the year, the memory market has experienced a series of positive developments in recent times that are contributing to market optimism.
In response to a massive run-up in inventory levels, the top three memory makers – Samsung, SK Hynix, and Micron – acted decisively by cutting wafer production in early 2023. The reductions are expected to total as much as 25% in 2023, causing stockpiles to decrease.
Although demand for PCs and consumer electronics remains weak, memory makers, including Samsung and SK Hynix, note an explosive increase in high-bandwidth memory (HBM) DRAM sales. HBM is commonly employed in AI data center servers, where high speeds are required to support demanding tasks like training neural networks.
Secure Lower Memory Prices Now
Samsung and SK Hynix also received good news as the U.S. government exempted the companies from export controls that would have prohibited them from equipping their advanced memory fabs located in China. The move will free the companies to boost capacity for new, more sophisticated memories.
These positive developments indicate that DRAM prices will start to rise in the fourth quarter. Buyers should lock in lower prices now before rising demand and falling inventories spur significant price increases.