Memory price hikes bring huge profits, but Samsung's position is not secure

Electronic product enthusiasts have been a bit depressed in the past two years, especially those who want to buy some cost-effective graphics cards and hard drives and upgrade their equipment at home.

Since 2013, many enthusiasts have begun to discover that due to the emergence of the Bitcoin miner industry in the world, they have bought up most of the graphics cards on the market, so the prices of their favorite graphics cards have not dropped and they will never be able to buy them.

In 2017, something even more cruel happened - not only are all graphics cards out of stock, but even memory and SDD solid-state drives, which used to drop in price every other year, have skyrocketed in price as if they had wings!

You have to know that the basic 128G hard drive I bought in 2015 can no longer install an extra game. Every time the Battle.net is upgraded, Xiaoxin's heart bleeds.

Shin-chan, who has not upgraded his equipment for more than two years, is now about to start crying.

This memory flash is simply unaffordable!

An enthusiast joked that in 2012, he bought a 4GB Kingston DDR3 memory for 99 yuan, used it for 5 years, and then sold it second-hand for 199 yuan. The return on investment was higher than buying a house.

Looking at the market charts of memory and solid-state drives in the past two years, whether it is low-end or high-end products, prices have been soaring since the second half of 2016. Almost all memory and solid-state drive products have increased by about 300 yuan.

Those who originally planned to spend more than 400 yuan to upgrade to a 500G solid-state drive this year are now dumbfounded. And those who didn't spend more than 200 yuan to buy a solid-state drive as a system disk when the price was at its lowest last year are now even more heartbroken.

Due to the increase in storage product prices in the past six months, Samsung has been pushed directly to the top of the semiconductor market, squeezing out Intel, which has dominated this position for 23 years.

IC Insights' report predicts that Samsung Semiconductor's sales in the second quarter of this year will be $14.9 billion, while Intel's sales in the second quarter will be $14.4 billion. The trend of surpassing Intel is obvious.

However, in the first quarter of this year, Samsung's sales were still $13.5 billion, while Intel's sales were $14.2 billion, a difference of $700 million. In just three months, Samsung's semiconductor growth rate reached 10%, which is a huge growth in the manufacturing industry.

With Samsung's own mobile phone market sluggish and there not much improvement in the chip foundry and screen markets, it can be said that these are basically all completed by Samsung's memory chip business.

Why are memory chips rising in price?

According to Moore's Law, the prices of electronic products, especially memory chip products, should drop drastically as technology advances. So why are they continuing to rise for more than a year?

The first reason is that Moore's Law is beginning to fail on a large scale.

Moore's Law applies to the era of steady improvement in integrated circuit chips. Now that the manufacturing process of silicon wafer electronic chips has exceeded 10nm, the past process technology can no longer be miniaturized, and new production processes must be added.

Extra processes cost money! Therefore, as technology improves, the price of electronic products may not drop significantly.

The second reason is that both DRAM memory and NAND flash memory are in the technology replacement period and production capacity cannot keep up.

The mainstream DDR4 memory currently used in computers and mobile phones has significant technical differences from the previous generation. There are also big differences in the gold fingers (interfaces) and timing, which has prevented many manufacturers from quickly transforming.

The previous generation DDR3 memory standard has been in place for eight years, which has led to the saturation of the old generation memory market. As a result, manufacturers specializing in DRAM technology have had a hard time, and many manufacturers have switched to developing NAND flash memory.

When the recent generations of PCs became widely popular and DDR4 became the mainstream of the market, people began to upgrade their configurations. Such demand came suddenly and the entire market was caught off guard.

Currently, Samsung, Toshiba, and Micron are able to mass-produce DDR4 memory very well. However, Taiwan's old-line manufacturers such as Nanya, Winbond, and Inotera failed to predict the market situation in advance and failed to make technical arrangements in advance, resulting in mass production only in the second half of this year.

As for NAND flash memory, only Samsung and Micron have relatively mature 3D NAND flash memory technology, and overall, the yield rate of mass production is too low, which directly increases the cost and the price is naturally high.

The third reason is the rapid explosion of market demand, especially in the corporate market.

In addition to the rapid increase in demand in the personal PC market mentioned by Xiaoxin above, the demand for DDR4 in the enterprise market has shown explosive growth.

In recent years, cloud services have become a battleground for major technology companies. Major Internet companies and technology companies have set up global locations and built data centers one after another, consuming a large amount of CPU, GPU, DRAM, NAND, etc.

The cloud service market is growing explosively, taking over most of the production capacity of major semiconductor manufacturers, leaving only a few products for the consumer market.

Especially now that the Bitcoin mining industry has emerged, the development of this industry has been exponential this year.

There is also a hot smartphone market. Smartphones are being consumed too quickly nowadays! A large number of users have started to replace their devices once a year. In the past two years, the basic standards for mobile phone memory and flash memory have grown from 2+16G in the previous year to 4+64G this year. On some super mid-range phones that pursue cost-effectiveness, the sales of 6+128G are getting better and better. Now, smartphones with 8+256G have already appeared!

This is equivalent to the total market volume remaining unchanged but demand directly quadrupling!

How can the price not go up when there are too many monks and too little meat?

Of course, other reasons include the depreciation of the RMB, which was the culprit for a wave of price increases at the end of last year. There was also a small move by the industry leader Samsung - Samsung directly cut off the DRAM memory production line, which was the most in short supply in the market, and replaced it with the production of NAND flash memory. Because at that time, the increase in NAND flash memory was greater, and the demand was rising faster!

These directly led to Samsung's rapid rise in the semiconductor market despite its failure in the mobile phone market.

However, Samsung Semiconductor's position is not solid, and its decline from prosperity is no joke

Now it seems like: Samsung is awesome! Samsung Republic is finally the boss!

But in fact, Samsung's position is not stable - after all, Samsung Semiconductor relies on the memory chip market. The memory chip market is notoriously unstable, and the current skyrocketing is only temporary. It will start to fall at the earliest in the second half of this year, and will plummet by mid-2018 at the latest.

Because most of Samsung Semiconductor's business is concentrated on manufacturing production technology, and it is still far behind in the more complex field of chip design. More importantly, there is a clear intellectual property protection system in the field of chip design, and the income is more stable and reliable.

In the chip design market, the United States, Japan, and Taiwan have always dominated the market, and Samsung and even South Korea have never had a say.

Currently, Samsung's memory chip business is divided into storage chip products for the enterprise market and memory and solid-state drive products for the consumer market. However, the most important storage driver chip and memory module business for the enterprise market has not yet been opened up, and these markets are still firmly in the hands of Intel, Qualcomm, Apple, MediaTek, Marvel, and even Taiwan's Kingston, Memory, and ADATA.

Of course, in the new UFS standard era, Samsung has won certain promotion advantages by virtue of its market dominance, but the relevant driver chip design is firmly in the hands of each chip manufacturer. Not only does Apple not use Samsung's driver chips, but even the storage technology standard currently used in the iPhone is NVMe, which is consistent with PC products.

Samsung's poor chip design capabilities are even mentioned in the industry through a story told by Wang Xuehong:

Because she thought Samsung's chip design capabilities were too poor to cooperate, HTC's Wang Xuehong took it lightly and sent a team to design OLED drivers for Samsung and develop new mobile phones, which enabled Samsung's OLED screens to be mass-produced and commercialized smoothly. But in the end, when HTC's mobile phones using Samsung's OLED screens were hotly sold, Samsung stopped supplying them, which was a severe blow. Wang Xuehong has always been resentful about this incident.

In the past two years, Samsung has relied on its dominant position in the smartphone market to build its own chips while taking over Qualcomm's chip foundry business in order to increase its voice in the chip design field.

But now, Samsung's wafer foundry technology can no longer keep up with the pace! In 2014 and 2015, Samsung went to TSMC to poach people and boasted that its 20nm enhanced technology was 14nm, forcing TSMC to change its process to 16nm. At that time, the industry exclaimed that TSMC was finished! But hardware design is not something that can be surpassed casually.

At present, TSMC's 10nm chip technology performance and energy efficiency far exceed Samsung. In order to continue to maintain its leading position in the industry, Qualcomm cannot always wait for Samsung to grow.

The latest news says that Samsung has to concentrate its manpower on the research and development of the next generation 6nm technology in order to win the next generation of foundry orders.

At the MWC Shanghai currently being held, there is news that Qualcomm has transferred the foundry of the next-generation Snapdragon 840 flagship chip to TSMC.

After years of planning and catching up, Samsung is now at the forefront of the industry in OLED driver chip technology, and is at an upper-middle level in camera driver, storage driver, and fingerprint recognition driver, and these technologies are basically aimed at the consumer market. Samsung does not have much advantage in the broader chip design market.

With Taiwanese companies catching up quickly and mainland China heavily subsidizing the memory chip sector in an effort to catch up, if Samsung fails to come up with a new consumer electronics market, its prosperity will turn into decline in the next two years.

Having said so much, there is still one key point that has not been mentioned:

The IC Insights report is only a prediction and does not completely confirm that Samsung's semiconductor sales have surpassed Intel. Given the difference of US$500 million, the result could be completely different if the calculation method is changed.

This method has long been used by domestic companies. Many domestic companies use generally accepted accounting principles and non-generally accepted accounting principles to calculate revenue. Non-generally accepted accounting principles can include all unsold businesses and produce a beautiful number.

Due to the brand crisis caused by the serious explosion and recall of Samsung Note7 last year, Samsung launched a large-scale public relations campaign this year. Especially after the new South Korean President Moon Jae-in took office, he carried out a lot of public relations lobbying by taking advantage of the South Korean government's diplomatic actions.

Earlier this month, there was a joke that Samsung's VR device shipments exceeded those of HTC Vive and PSVR. Samsung has not yet launched a professional VR device, and its Gear VR is just an entry-level head-mounted VR product that plugs into a mobile phone and cannot be compared with the latter two.

After IDC released the statistics, Samsung was immediately promoted as the number one in the VR industry. I have to admire such PR propaganda.

In view of this, the event of Samsung surpassing Intel is more likely to be a mistake.

But for ordinary consumers, the prices of our memory and solid-state drives will not drop significantly this year, and may even rise sharply to levels that are even more unaffordable.

But everyone must persevere, because by the off-season in March or April next year, the prices may drop drastically!

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.