The ripple effects of soaring memory semiconductor prices are spreading across the entire electronics industry. Complete product manufacturers producing TVs, home appliances, smartphones, and other goods are demanding price reductions from component suppliers, including display and sensor manufacturers, to slightly alleviate the burden of memory costs. As memory chips, which are in short supply, cannot be lowered in price, the cost burden is being shifted to other component suppliers. While the semiconductor industry has entered a "supercycle" (boom), complete product and component manufacturers using semiconductors as parts are facing "chipflation" (a portmanteau of "chip" and "inflation") as a cause of deteriorating performance. Observers in the IT industry suggest that the semiconductor companies’ solo prosperity could continue for an extended period. The impact of chipflation is reaching beyond complete product manufacturers to component suppliers. According to the tech industry on the 19th, complete product manufacturers are reportedly strongly demanding price reductions from component suppliers. As the surge in memory prices increases cost burdens, they aim to suppress overall cost increases by lowering the prices of non-memory components. The display industry, which accounts for nearly half of TV production costs, is also under pressure to reduce selling prices during negotiations. A representative from a component supplier to smartphone manufacturers said, “We expect price reduction pressures from complete product manufacturers in the first half of the year” and added, “We are also preparing for a prolonged memory shortage.” Samsung Display and LG Display recently stated in their earnings reports that panel price pressures due to memory price hikes are the biggest variable affecting this year’s performance. Memory prices have been rising sharply every quarter. According to market research firm Counterpoint Research, universal DRAM prices are estimated to have surged 91% in the first quarter of this year compared to the previous quarter. While the proportion of memory costs in smartphones, home appliances, and PCs is rapidly increasing, it is difficult to raise selling prices recklessly due to economic downturns and intensified competition. Consequently, price reduction pressures are shifting to component industries such as displays, camera modules, and substrates, where price adjustments are possible. A component industry official said, “The burden of semiconductor price surges is quickly being passed to component companies with relatively weak bargaining power” and added, “If this phenomenon prolongs, it could shake the profit structure of the entire electronics component ecosystem.” Complete product manufacturers are also increasingly adopting mid-range components to reduce costs. LG Display has been supplying mid-range organic light-emitting diode (OLED) panels with lowered prices since the first quarter, responding to requests from major TV manufacturers. The panels maintain OLED’s unique color reproduction capabilities while reducing prices to the level of mini LEDs, which Chinese companies primarily use. The goal is to target premium TV demand based on OLED while maintaining price competitiveness through mid-range components. Concerns are growing that the profitability of complete product and component industries could decline alongside the semiconductor boom. In a situation where memory price increases are not fully reflected in complete product prices, the foundational strength of the entire electronics industry ecosystem could weaken. Samsung Electronics’ DA and VD business divisions, responsible for home appliances and TVs, recorded a loss of 200 billion Korean won last year, while LG Electronics’ MS division, handling TV business, posted a loss of 750.9 billion Korean won. Samsung Electronics’ Mobile Experience (MX) division, responsible for smartphones, is also expected to perform poorly this year. A tech industry official said, “This year, rising product launch prices, reduced shipments, and price reductions for smartphones and PCs could collectively impact the entire electronics industry, from complete products to components.” (ICE SEOUL)

Fonte notizia: The Chosun Daily