Prices of memory chips, notably NAND flash and DRAM, are likely to increase significantly in the second quarter of the year, a report showed Thursday, boding well for South Korean chipmakers that dominate the sector.

Contract prices of NAND flash are expected to increase by an average of 3-8 percent in the second quarter of 2021 from the previous three months, according to market researcher TrendForce, due to easing of oversupply.

"Orders from PC OEMs (original equipment manufacturers) and Chinese smartphone brands since 1Q21, as well as recovering procurement activities from clients in the data center segment during 2Q21, will generate upward momentum propelling NAND flash bit demand," it said.

"Furthermore, buyers are actively stocking up on finished products, such as SSDs (solid state drives) and eMMC (embedded multi-media controller), due to persistently limited NAND Flash controller supply."

A monthlong shutdown of Samsung Electronics Co.'s plant in Texas is also forecast to push up prices of NAND flash products, especially client SSDs and enterprise SSDs, with the supply shortage problem regarding NAND flash controllers.

"In particular, as Samsung's Line S2 fab in Austin has yet to resume full operation after the Texas winter storm, the supply of NAND Flash controllers going forward may be at risk," it said. "TrendForce is not ruling out the possibility that NAND Flash contract prices may increase by even more than current forecasts."

Samsung was the world's largest NAND flash producer in the fourth quarter of 2020, with a market share of 32.9 percent, according to TrendForce data. Its South Korean rival SK hynix Inc. was the fourth-largest vendor with a market share of 11.6 percent.

Regarding DRAM, TrendForce predicted that average contract prices of DRAM products are to rise 13-18 percent quarter-on-quarter in the April-June period after experiencing 3-8 percent growth in the current quarter.

"At the moment, the DRAM market has formally entered a new cycle of rising prices," it said. "Clients in the data center segment will resume large-scale procurement ... DRAM buyers across different application segments will be under pressure to stockpile."

The market researcher in particular predicted that prices of server DRAM chips could go up 20 percent in the second quarter.

"With regards to the demand for server DRAM, the second quarter is traditionally the peak season for server shipments," it said. "TrendForce expects server DRAM buyers to be more aggressive in inventory building during 2Q21 and begin to raise the procurement quantity on a monthly basis."

Samsung and SK hynix are the two largest DRAM suppliers in the world, accounting for 42.1 percent and 29.5 percent market share, respectively, in the fourth quarter of 2020, according to TrendForce. (Yonhap)