Low-end mobile market supports chip industry growth

Driven by the demand in the Chinese market, the entire smart phone industry is shifting toward the direction of low-cost mobile phones, helping chip manufacturers expand their customer base. In addition, China's smart phone manufacturers such as Huawei, ZTE and Lenovo are also growing, threatening Samsung and Apple, which dominate the market. The rise of the low-end smart phone market in China offsets the impact of the decline of high-end devices such as Apple.

According to foreign media reports, Asian chip makers are planning to use the turbulent situation of the major restructuring of the industry to make money. Over the past many years, prudent investment activities have kept Asia's chip supply to a halt, and now Asian manufacturers are seeking more profits at the expense of Apple's and other mobile device manufacturers. This means that they are breaking their previous forces. Balanced situation.

Chip makers, including Toshiba and SK Hynix, are preparing to make profits from the huge growth in demand for low-priced tablet PCs and smart phones in the Chinese market, which is currently the world's largest smartphone market. At the same time, Huawei and other Chinese mobile device manufacturers are also emerging. From the perspective of the high-end market, although the growth rate of relatively high-priced smart phones has slowed down compared with the past, the demand for mobile devices with increasing memory capacity will support the chip sales market.

All of these factors, coupled with the reduction in investment since 2011, mean that prices for DRAM (dynamic random access memory) and NAND memory chips have begun to rise, prompting chip makers to increase their bargaining power to the highest level in years.

Hong Sung-ho, an analyst at I'M Investment & Securities, a securities investment company, pointed out: "In the past few years, market demand has been growing explosively, and investment activities of chip manufacturers have been suppressed, but these investments are now bringing to chip manufacturers. Return."

Until the beginning of last year, chip makers had little bargaining power because the only NAND chips used in mobile devices were Apple and Samsung. Both of these global giants have focused on the high-end market. Now they have all faced a slowdown in growth rate because the high-end market, a profitable market, is already close to saturation.

Driven by the demand in the Chinese market, the entire smart phone industry is shifting toward the direction of low-cost mobile phones, helping chip manufacturers expand their customer base. In addition, China's smart phone manufacturers such as Huawei, ZTE and Lenovo are also growing, threatening Samsung and Apple, which dominate the market. In the Chinese smartphone market, about 70% of mobile phones are priced at less than 1,000 yuan (about 160 US dollars), and 10% of the price is between 1,000 yuan and 3,000 yuan (about 490 US dollars). From the point of view of tablet computers, the price of ultra-low-priced products is only less than 100 US dollars, and the sales of such products are also increasing.

Greg Nho, an analyst at South Korea's investment company HMC Investment Securities, said: "The size of Apple's orders is a major factor in price changes, but the demand from Chinese manufacturers has now far more than offset this volatility."

Although personal computer sales have fallen sharply, the prices of DRAM (dynamic random access memory) chips used primarily for computers have soared by nearly 90% so far this year. The NAND memory chip market is also facing tight supply. Outside the Chinese market, the demand for NAND chips is increasing because consumers need more storage capacity on high-priced mobile devices to watch high-quality videos and listen to high-quality music.

“In the past, we only used mobile devices to take photos; but today, we are still shooting video on mobile devices, and the resolution is higher than before.” Damian, head of research at Macquarie Capital Securities in Tokyo · Damian Thong said. "I think there is still a huge opportunity in the NAND flash market."

For example, HTC’s flagship smartphone, the HTC One, is equipped with a 64GB NAND memory chip, which is four times that of most other high-end smart phones. Toshiba, the second-largest NAND chip maker, said on Tuesday that the company will expand its production capacity in the Japanese market. The company will invest nearly 30 billion yen (about 300 million U.S. dollars). Samsung is currently the world's largest chip maker. The company is investing US$7 billion in the Chinese market to build a NAND chip factory. Micron Technology is planning to increase investment in mid-2014, and the company is currently working to complete the acquisition of the bankrupt Japan chipmaker Elpida Memory by the end of August.

However, although some chip makers are raising investment scale for the first time in years, almost no one believes that this market is moving toward oversupply. According to estimates by HMC Investment Securities, the total capital expenditure of storage chip manufacturers will fall by 2.6% this year to 12.3 billion U.S. dollars. Most manufacturers are keeping their investment activities on a smaller scale because they are preparing for the arrival of the 3D chip process, which is a major technological leap for the current planar structure.

Damian Song of Macquarie Capital Securities pointed out that although chip makers are preparing to build new production facilities, the demand for NAND chips will continue to outstrip supply. He predicted: "In the next 12 months, the price of memory chips and their profitability will remain at a high level."

In recent years, Samsung has become more conservative. This is not the same as its traditional approach of pushing competitors to desperation. The specific approach is not to allow competitors to become too profitable. “By creating an oversupply situation, Samsung was able to suppress competitors in the field of memory chips in the past,” said Mark Newman, a research analyst at investment research firm Sanford C. Bernstein. “But today, the strategy of driving down the price of memory chips has helped Samsung’s mobile phone and tablet competitor. Therefore, Samsung is very motivated to create a supply shortage and high price of memory chips.”

Samsung is the world's largest NAND chip maker, with a market share of approximately 38%; followed by Toshiba with a share of 28%; SK Hynix is ​​again with a share of 13%.