One of this week’s main intrigues for the investment community, as explained Bloomberg, will be the release of a quarterly report by Samsung Electronics. This largest manufacturer of memory chips, unlike its main competitors, has not yet agreed to reduce production and investment volumes. Whether the South Korean giant will take such action is hard to say for sure, but all memory makers risk losing up to $5 billion in operating losses this year.
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Market participants’ inventories have already more than tripled to record highs, reaching three or four months in terms of product shipments, according to Bloomberg estimates. Samsung’s business size and diversification of activities allow the company to remain comfortable even in the current crisis while maintaining the ability to fund the creation of new businesses with an eye to the future.
Tim Archer, head of lithography equipment supplier Lam Research, said at a recent event that the memory industry is now taking unprecedented action not seen in the last 25 years. In the RAM chips business, instead of struggling to strengthen their position in this segment, market players are trying to reduce production volumes and focus on improving profitability. The flash memory market is more segmented, and if there is a recovery trend, it will be realized about a quarter after the RAM market. It’s possible that NAND memory manufacturers will choose to consolidate to survive.
The most likely deal in this space is the merger of Western Digital and Kioxia, but they’re already partners and produce memory in a joint venture, so it’s hard to predict how much the parties will benefit from the core business combination. According to analysts at HMC Investment & Securities, storage demand will recover in the second half of the year. This is facilitated in many ways by the Chinese economy’s exit from the sanitary restrictions inherent in the time of the pandemic.
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