South Korea’s top chipmakers are expected to see their earnings improve in 2014, with rising demands recouping losses from the falling prices of dynamic random access memory chips, analysts said Wednesday.
Data from market researcher DRAMeXchange said that the fixed price of DDR3 2 Gb 256Mx8 1333 MHz chips, the standard in setting the price of DRAMs, came to $1.81 in the second half of March, down 8.1 percent from the $1.97 a year earlier.
“While the price is on a downward trend, it is not as steep as expected earlier,” said Lee Seung-woo, an analyst at IBK Investment & Securities.
Lee said while DRAM prices lost ground in recent months, chipmakers boosted their productivity by slashing production costs.
The increasing demands for chips will help recoup losses from the falling prices, he said.
Analysts have predicted that South Korea’s No. 1 tech giant, Samsung Electronics Co., will see its semiconductor business post an operating profit of around 2 trillion won ($1.8 billion) for the January-March period, close to the 1.9 trillion logged in the previous quarter.
Samsung is set to release its first-quarter earnings for each of its business divisions later this month.
SK Hynix is also expected to see its operating profit reach 1 trillion in the first quarter, compared with the 784.7 billion tallied three months earlier, although the heightened competition with Samsung is feared to weigh down on its market presence, analysts said.
The improved outlook for SK came as its production line in China was normalized in January after it was stalled from a fire in September 2013.
For the remaining 2014, Samsung and SK, which respectively take up around 45 percent and 30 percent of the global DRAM market, will continue to see their earnings gather ground, they added.
Analysts said China’s introduction of the Long Term Evolution network in the country will become an opportunity for local chipmakers, with improved sales expected to be reflected on their balance sheet starting in the second quarter.
Microsoft’s suspension of technical support, including security updates, for the Windows XP operating system since April 8 will also bolster more demand for PC DRAMs, they said.
The downward trend of DRAM prices, however, calls for close attention by the market as it can weigh down heavily on local chipmakers if it persists.
“The desirable fluctuation of DRAM prices is around 5 percent,” said Kim Ji-woong, an analyst at Etrade Korea Co. “If the decline observed in March continues, local chipmakers’ earnings will lose ground this year.” (Yonhap)
