In response to complaints from mobile phone manufacturers, regulatory authorities have started scrutinizing memory chip prices, which have been on a steady upward trend for six consecutive quarters and are expected to continue rising in the first quarter of next year. On December 21, multiple sources told the 21st Century Business Herald that the National Development and Reform Commission (NDRC) has already held discussions with Samsung regarding this issue. However, it remains unclear whether an antitrust investigation will be launched.
Samsung is the world’s leading manufacturer of memory chips, holding approximately 48% of the DRAM market and 35.4% of the NAND Flash market. These two types of memory chips are essential components in smartphones, computers, and servers. According to China Flash Memory Market (CFM), the global storage chip market reached $950 billion in 2017, with DRAM accounting for about $50.35 billion and NAND Flash around $40 billion.
The price increase in memory chips began in Q3 2016 due to supply shortages, causing a ripple effect across various industries. Mobile phones, solid-state drives, and memory modules all saw significant price hikes. For example, popular smartphones saw price increases of 100–200 yuan, while flagship models were priced up to 300 yuan higher than previous versions. Some memory chips even experienced a 300% price surge within a year.
Many industry analysts initially predicted that the price hike would end by the second half of 2017, based on production cycles. However, the price reductions have been delayed until the second half of 2018, leaving manufacturers struggling with rising costs.
"Storage has now become the biggest cost in mobile phones, surpassing the screen and CPU," said a mobile phone manufacturer. "The cost of storage in phones has reached 25%–35%, and smaller manufacturers have little say in pricing." The prices of flash memory for different capacities have risen by more than 30%–40% this year. For instance, the price of 32GB and 64GB flash memory increased by $5 and $10 respectively, while 128GB flash memory saw a $20 jump—this is extremely concerning for manufacturers.
Only a few global suppliers dominate the storage chip market, including Samsung, Micron, Toshiba, Hynix, and Western Digital. Together, Samsung, Micron, and Hynix control over 90% of the DRAM market.
These high profits have significantly boosted the earnings of these chip giants. Samsung’s latest financial report showed that its revenue in Q3 2017 reached $54.5 billion, a 29.7% year-on-year increase, with net profit hitting $12.76 billion—a 179.47% rise. In the first three quarters of 2017, Samsung’s total revenue was $152.456 billion, up 16.8% from $130.446 billion in the same period in 2016. Its net profit for the first nine months was $33.81 billion, a 92.3% increase. While Samsung's consumer electronics division suffered due to the battery issues, its semiconductor business became the main source of profit.
Notably, in Q2 2017, Samsung’s semiconductor division generated $15.73 billion in revenue, surpassing Intel’s $14.776 billion, making Samsung the world’s largest chipmaker for the first time. From June 1, 2016, to the present, Samsung’s stock price rose from 1.33 million won to 2.554 million won—a 90% increase. In November 2017, Samsung hit a 10-year high, reaching 2.86 million won.
According to news from Taiwan’s industry chain, Samsung and Hynix announced plans to raise DRAM sales prices by 3%–5% in the first quarter of next year, with storage product prices expected to keep rising.
As the world’s largest producer and consumer of electronic products, China has become the most affected market in this price surge. However, PC and smartphone manufacturers have limited power to negotiate prices against these major players. Even Foxconn, known for its strong supply chain management, finds itself powerless. A Foxconn source told reporters, “The market clearly feels oversaturated. At the beginning of the year, we couldn’t buy anything with money. Now, we can buy it, but at a much higher price.â€
Price collusion among the big players has raised concerns. Industry insiders speculate that there may be a price agreement among the major oligarchs. This type of behavior was previously seen in 2000, when the U.S. Department of Justice fined companies like Samsung, Hynix, and Micron a total of $730 million for price fixing—an antitrust penalty that ranked second in U.S. history.
In 2000, during the global internet crisis, the PC market shrank significantly, and DRAM prices fell sharply. However, after the market failed to recover, DRAM prices rebounded quickly, rising over 300% in just six months. Companies like Dell, HP, Apple, and IBM faced immense pressure from the price hikes. This led the U.S. Department of Justice to investigate, resulting in fines totaling nearly $730 million.
Although it is still uncertain whether regulators will launch an antitrust probe into current price increases, the potential for price cartels is a growing concern. Such practices not only allow companies to control prices and maximize profits but also help eliminate competitors. With the ongoing price surge, Samsung and other memory giants are accumulating substantial cash flow. As Chinese companies begin to enter the memory chip industry, they will inevitably face fierce competition from established players like Samsung and Micron.
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