South Korea's memory industry may recover in 2020 as demand for 5G and data centers grows

According to the Korea Herald, semiconductor industry observers pointed out that after experiencing a brutal slump this year, South Korea's memory chip industry is expected to show signs of improvement in 2020, mainly due to the continued growth in demand for 5G equipment and the recovery of global data center investment.

Lee Su-bin, an analyst at Daishin Securities in South Korea, said that many signs of the semiconductor industry's fundamentals indicate that the industry's prosperity will improve in 2020. Lee added that the DRAM market is expected to reach a balance between supply and demand, thanks to capacity adjustments by major chipmakers, and DRAM prices will rebound in the second quarter of next year.

According to data from market research firm DRAMeXchange, the average selling price of DRAM chips has narrowed in recent months after plunging 20% ​​to 25% year-on-year in the first half of this year amid weak demand and high inventory levels.

At the same time, the agency pointed out that with the procurement demand for DRAM chips by data centers in the second half of the year, the inventory levels of Samsung and SK Hynix are decreasing.        

Once DRAM suppliers’ inventory levels reach a low enough level, they will no longer encourage sales through price cuts. This could become a driving force for DRAM price stabilization and recovery in 2020.

      On the other hand, 5G will be the main factor driving the recovery of the semiconductor market next year.

      According to a report from market research firm IHS Markit, although the global chip market's total revenue is expected to plummet 12.8% to US$422.8 billion in 2019, the surge in 5G mobile phone shipments will drive total revenue to US$448 billion in 2020, a year-on-year increase of 5.9%.

      Currently, both Samsung and SK Hynix have planned to start mass production of the fifth-generation low-power DDR, which may accelerate the recovery of the Korean memory market.