DRAMeXchange, tech market intelligence firm TrendForce's memeory and storage branch, today added yet another entry to the list of industries expected to be negatively affected by tension between the U.S. and China. The research firm announced that it expects Huawei's blacklisting by the U.S. government to contribute to a DRAM price drop of up to 15% in the third quarter.
"As ripples from the U.S. ban continue to spread, Huawei's shipments of smartphone and server products are feared to face heavy obstacles for the next two to three quarters , impacting peak-season-demand for DRAM products 2H and the time of price precipitation," DRAMeXchange said.
The DRAM market has already struggled amid falling demand, inventory surpluses and other problems. Those problems have led to steady price drops throughout 2018 and the first half of 2019. Memory companies have already felt the sting of these price drops--Samsung even ceded the semiconductor throne to Intel in May because its profits had dropped so much in recent quarters. Losing Huawei as a customer is expected to make things worse.
In its report, DRAMeXchange noted its earlier prediction that the likeliness of DRAM prices falling under suppliers' "fully-loaded costs" would be "extremely slim under the premises that the competition only consisted of three giants, and that DRAM production processes were nearing physical limits." The analyst is now changing its stance.
"Yet, a heated U.S.-China trade war may send demand in the second half of this year into quick-freeze, with the increasingly looming uncertainty compelling datacenters to make reductions to capex. Fragile DRAM suppliers may have to admit current inventory casualties on the books by the end of this year, and officially modify their financial statements to report: 'Loss,'" DRAMeXchange said.
As noted, the DRAM market isn't alone in suffering from the U.S.-China trade war. Increased tariffs have forced some companies to raise the prices on their products, and with both countries retaliating for the other's actions, manufacturers fear they could lose access to the massive Chinese market entirely. Some, like MSI, have shifted production to other countries in an attempt to avoid those tariffs; others seem to be trying to wait them out.
The decision to blacklist Huawei--ostensibly for national security purposes but widely viewed as leverage against China--also directly affected many U.S. companies. Most decided to stop working with Huawei entirely: Google, Arm and much of the U.S. semiconductor industry have all limited their involvement with the company, despite knowing their revenues would decline as a result.
But there is some hope for DRAM businesses. DRAMeXchange predicted that DRAM prices "have a chance to see a rebound in 2020 due to prices hitting bottom, limited supply bit growth and other factors." If they can weather the continued decline in memory prices throughout 2019, memory companies might once again know what it's like to see a prices trend upwards instead. We'll enjoy the reduced costs until then.