Memory chip spot prices have risen for the first time this year, indicating grim warnings of "never seen before" spikes and a supply disruption could come to pass as a dispute between South Korea and Japan drags on.
The 15 percent spike in DRAM chip prices over a week - in a sector dogged by oversupply and weak demand for more than a year - comes after Japan tightened curbs on exports of some chipmaking materials to South Korea - home to the world's top two memory chipmakers, Samsung and SK Hynix.
To be fair, the price surge indicated by industry tracker DRAMeXchange refers to the spot market that accounts for less than a tenth of the memory chip landscape as most major tech firms source through mid- and long-term contracts.
Given this background, major customers such as iPhone maker Apple are yet to start stockpiling, but the price spike has started fuelling fears that Japan's curbs will soon impact supply, several industry sources said.
"If the ban continues, memory prices will skyrocket like never seen before as 75 percent of DRAM and 45 percent of NAND global output is at risk," Mark Newman from Bernstein said, referring to South Korea's dominance in the supply of those memory chips.
A person at a South Korean chipmaker said customers were "following the situations closely" but "taking a wait-and-see approach as demand still remains weak".
Samsung and SK Hynix declined to comment.
"We will need contingency plans if the impact materialises," said a spokeswoman at Vaio, a Sony Corp spinoff.
"Options include seeking alternative chip suppliers outside South Korea," she said, adding business at the Japanese computer maker had, however, not yet been hit.
Taiwan Semiconductor Manufacturing Co Ltd, the world's top contract chipmaker, warned that Japan's export curb is the "biggest uncertainty" for the fourth quarter.
Japan has tightened curbs on exports of three chipmaking materials - fluorinated polyimides, used in smartphone displays; photoresists, used to transfer circuit patterns on to semiconductor wafers; and hydrogen fluoride, used as an etching gas when making chips.
South Korea sourced 94 percent of fluorinated polyimides, 92 percent of photoresists and about 44 percent of hydrogen fluoride from Japan in the first five months of this year, Korean industry data showed.
Seoul has said it is seeking to make its supply chain more independent and has been getting fresh offers from Russia and China to provide hydrogen fluoride.
A local media reported that South Korea was considering lowering import tariffs on these products from other countries to fill in any potential supply gaps.
"We ... do see some (chip) module manufacturers raising their quotes or announcing halts to production in light of the material restrictions ...," research firm TrendForce said.
In NAND flash market, supply has also been hurt by an output halt at Japan's Toshiba Memory last month due to a power outage.
A person at Toshiba Memory said the plant resumed operations in mid-July but it will take time for shipments to recover fully and that the company still has to catch up with existing orders.
Brokerage UBS said this week it expects NAND contract chip prices to fall 5 percent in the third quarter, less than a previous forecast for a 10 percent quarter-on-quarter drop, citing Toshiba's output cut and Japan's export curbs. But it kept its projection for a 17 percent drop in DRAM contract prices unchanged.
NAND chips are found in mobile devices as well as memory cards, USB flash drives and solid-state drives, while DRAM is used to support electronic devices performing multi-tasks.
Clear winners from better chip prices would be Micron, Toshiba, Nanya and Western Digital, Bernstein's Newman said.
"Samsung and SK Hynix, although potentially hurt from production issues, would also benefit from significantly higher prices and ironically likely still be net winners," he added.
Shares of Micron have risen 12 percent since Japan announced the export curbs on July 1, while Western Digital Corp and SK Hynix have gained 8 percent and 7 percent respectively. Taiwan's Nanya Technologies has increased 5 percent.
Samsung shares, however, have dipped 2 percent over the period, hurt by its forecast for a 56 percent plunge in second-quarter profit due to tumbling memory chip prices.