The PC DRAM contract average selling price (ASP) in May was down 6% month on month, and 2Q ASP is now trending worse than we expected. Shares for Samsung Electronics (SEC) and Hynix are down 11% and 20% from their recent peaks and are discounting market concerns to an extent, but we expect investors to remain on the sidelines until there is clarity on 2H demand and a trade-war resolution.
Huawei issue leading to weak ASP sentiment
Our checks reveal that due to the trade war and Huawei issue, memory purchasing and pricing sentiment have taken a beating which raises the possibility of higher-than-expected ASP erosion in the second half of this year. DRAM supplier inventory is high and if 2H demand fails to pick up, then pricing power will remain firmly in the customer hands.
DRAM suppliers still confident in a hyper-scaler demand rebound
Apart from the risk to smartphone-related demand in 2H, our checks reveal inventory at hyper-scale customers is normalising and DRAM suppliers are expecting a pick-up in activity from these customers by the end of June and acceleration in 2H19.
For more insights, follow us on LinkedIn and click to subscribe to CLSA’s monthly newsletter.