China hands Asian memory makers massive bargaining chip
Asian chipmakers are set to cash in on a major
realignment in the volatile industry which is tilting the power balance
their way at the expense of gadget makers such as Apple Inc , after
years of cautious investment kept supply in check.
Manufacturers including Toshiba Corp and SK Hynix are poised to reap the rewards of soaring demand for cut-price tablets and smartphones in China, the world's biggest smartphone market, and the emergence of Chinese mobile device makers such as Huawei Technologies Co Ltd .
At the high end of the spectrum, demand for gadgets armed with ever greater memory capacity will fuel chip sales even if the market for relatively expensive handsets does not see the kind of rapid growth it has in the past.
All of this, combined with reduced investment since 2011, means the prices of dynamic random access memory (DRAM) and NAND memory chips have started to rise, and chipmakers are enjoying the most bargaining power they have had in years.
"Chipmakers are reaping the benefits of curtailed investment of recent years just when demand is exploding," said Hong Sung-ho, an analyst at I'M Investment & Securities.
Chipmakers had little bargaining power until early last year as Apple and Samsung were the sole major buyers of NAND chips used in mobile devices. The two global heavyweights, which focus on the high-end market, are now struggling with slowing growth as this most profitable segment nears saturation.
China is driving the industry's rapid shift to cheaper smartphones, helping chipmakers broaden their customer base from Apple and Samsung Electronics Co Ltd.
The growth of Chinese smartphone makers such as Huawei, ZTE Corp and Lenovo Group Ltd is threatening to weaken the dominance of Apple and Samsung, playing into the chipmakers' hands.
Some 70 percent of China's smartphone shipments are sold at 1,000 yuan or less, while 10 percent are in the 1,000-3,000 yuan range. Super-cheap tablets costing less than $100 are also soaking up supply.
"Despite weakening demand from Apple, NAND prices have... firmed up, largely thanks to strong demand growth from China," said HMC Investment & Securities analyst Greg Nho.
"The size of the Apple order was a big price-swing factor, but now demand from Chinese manufacturers is more than offsetting this volatility."
Prices of DRAM chips, mainly used in computers, have leapt nearly 90 percent so far this year even as PC sales have plummeted, while the market for NAND memory chips has tightened.
Outside of China, demand for NAND chips is increasing as consumers need more memory capacity to play high-quality video and music on up-market gadgets.
"In the old days, we only took a few photographs. Now we take videos as well, at potentially higher resolutions," said Damian Thong, director of research at Macquarie Capital Securities in Tokyo.
"I actually think the opportunity for NAND flash is enormous, still, and very untapped."
Manufacturers including Toshiba Corp and SK Hynix are poised to reap the rewards of soaring demand for cut-price tablets and smartphones in China, the world's biggest smartphone market, and the emergence of Chinese mobile device makers such as Huawei Technologies Co Ltd .
All set to cash in (Image credit: Yahoo!)
At the high end of the spectrum, demand for gadgets armed with ever greater memory capacity will fuel chip sales even if the market for relatively expensive handsets does not see the kind of rapid growth it has in the past.
All of this, combined with reduced investment since 2011, means the prices of dynamic random access memory (DRAM) and NAND memory chips have started to rise, and chipmakers are enjoying the most bargaining power they have had in years.
"Chipmakers are reaping the benefits of curtailed investment of recent years just when demand is exploding," said Hong Sung-ho, an analyst at I'M Investment & Securities.
Chipmakers had little bargaining power until early last year as Apple and Samsung were the sole major buyers of NAND chips used in mobile devices. The two global heavyweights, which focus on the high-end market, are now struggling with slowing growth as this most profitable segment nears saturation.
China is driving the industry's rapid shift to cheaper smartphones, helping chipmakers broaden their customer base from Apple and Samsung Electronics Co Ltd.
The growth of Chinese smartphone makers such as Huawei, ZTE Corp and Lenovo Group Ltd is threatening to weaken the dominance of Apple and Samsung, playing into the chipmakers' hands.
Some 70 percent of China's smartphone shipments are sold at 1,000 yuan or less, while 10 percent are in the 1,000-3,000 yuan range. Super-cheap tablets costing less than $100 are also soaking up supply.
"Despite weakening demand from Apple, NAND prices have... firmed up, largely thanks to strong demand growth from China," said HMC Investment & Securities analyst Greg Nho.
"The size of the Apple order was a big price-swing factor, but now demand from Chinese manufacturers is more than offsetting this volatility."
Prices of DRAM chips, mainly used in computers, have leapt nearly 90 percent so far this year even as PC sales have plummeted, while the market for NAND memory chips has tightened.
Outside of China, demand for NAND chips is increasing as consumers need more memory capacity to play high-quality video and music on up-market gadgets.
"In the old days, we only took a few photographs. Now we take videos as well, at potentially higher resolutions," said Damian Thong, director of research at Macquarie Capital Securities in Tokyo.
"I actually think the opportunity for NAND flash is enormous, still, and very untapped."
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