While there are concerns that growth of Samsung Electronics
Co.’s smartphone business will slow, the South Korean technology giant’s
memory-chip business may become its new bright spot.
Samsung is best known for consumer electronics such as its
Galaxy smartphones and television sets, but the company is also the world’s
biggest supplier of memory chips used to save data in various electronic
devices.
“The strong outlook for the memory-chip business more than
makes up for concerns about a slowdown in smartphones,” said Sanford C.
Bernstein analyst Mark Newman, who has an “outperform” rating for Samsung
shares.
A major factor behind the bullish view on Samsung’s
memory-chip business is the rise in chip prices, due in part to a fire that
broke out last month at a factory that produces dynamic random access memory
chips. DRAM chips are widely used in
personal computers, tablets and smartphones, and Samsung is the largest
supplier of such chips. SK Hynix Inc., the South Korean chip maker that runs
the factory, has said that it expects the plant to return to normal operations
by November.
DRAMeXchange, which tracks the chip market, said last week
that the rise in DRAM prices will likely persist in the coming months amid
tighter supply.
The fire has spurred expectations of a possible shortage of
not only DRAM chips but also of another type of memory chip called NAND flash
memory. Hynix has said it may use some of its NAND chip production capacity to
produce DRAM chips instead to make up for lost output after the fire. NAND chip
contract prices rose between 3% and 6% in the second half of September,
according to DRAMeXchange.
Solid chip pricing is not just a temporary outcome of the
fire, but also a longer-term trend as a result of consolidation in the chip
industry, Mr. Newman said. In the DRAM market, for example, U.S. chip maker
Micron Technology Inc.’s acquisition of Japanese rival Elpida Memory Inc. last
year, as well as the decline of Taiwanese DRAM chip suppliers, has resulted in
more restrained supply and better pricing, he said.
Increasingly, investors are wondering whether Samsung’s
smartphone business can sustain its profit growth even if the percentage of
cheaper handsets — typically sold at lower margins — increases in Samsung’s
overall smartphone sales volume.
As of Monday afternoon in Asia ,
Samsung shares were up 1.3%.
Via Aaj.tv
