The author is a KB Securities analyst. He can be contacted at [email protected] – Ed.

DRAM prices in 4Q21 will be higher than expected

We maintain KRW 100,000 BUY and TP on SEC. We remain optimistic about the company as DRAM prices and shipping negotiations have progressed without any major issues, pointing to higher than expected prices and orders in 4Q21; DRAM orders from North American cloud companies (e.g. Amazon, Microsoft) and PC manufacturers (e.g. Dell, HP) are estimated to be 30% higher than expected based on:

(1) investments in servers for the establishment of metaverse platforms;

(2) the growing demand for business PCs; and

(3) DRAM stocks fell to one third of 3Q21 levels. As a result, the drop in DRAM contract prices for 4Q21 should be smaller than expected by market research firms (-10% QoQ to -7% QoQ).

DRAM prices hit their lowest in 1Q22

For the first time in seven months, there has recently been a slight increase in chip orders from PC manufacturers (eg Dell, HP, Lenovo). We attribute this to the following:

(1) The reduction in the supply shortage has increased the visibility of demand for 2022.

(2) The demand for business PCs has increased since the launch of the Korean government’s “Living with COVID-19” policy.

As a result, spot prices for DRAM (i.e. 8GB DDR4), which are responsive to PC demand, increased for the first time since July, suggesting that prices are bottoming out. Since spot DRAM prices have traditionally acted as a leading indicator of contract prices, we expect 1Q22 to mark a low for DRAM prices.

Fleas will be essential in establishing the metaverse

We’re seeing semiconductors, especially high-capacity chips, emerging as the cornerstone of establishing the metaverse alongside cloud computing, advanced 5G computing, and headsets that support high-definition graphics ( VR, XR). Metaverse headsets, whose market is expected to grow tenfold over the next five years, are expected to require as many memory chips as smartphones; Apple’s release of the XR device expected in 2022 is expected to catalyze market growth. SEC stock is up 7% from its 2021 low, making it more attractive than SK hynix, which is up 28% from its 2021 low.