Semiconductor Price Peak Imminent... Is the 'Era of P' Ending and the 'Era of Q' Arriving?

The semiconductor industry is facing a paradigm shift from price-driven growth (P) to quantity-driven growth (Q). While AI infrastructure investment has exploded, changing the demand structure, analysis suggests that macroeconomic variables such as interest rates could regulate the pace of investment.

In this discussion presented by the economic YouTube channel 'The Man Who Explains the Economy (Kim Kwang-seok TV)', semiconductor expert author Lee Hyeong-su, pan-success expert CEO Jang Woo-jin, and Professor Kim Kwang-seok participated to diagnose the past and future of the semiconductor market. They collectively agreed that the current semiconductor market is in a transition period, entering a 'Q cycle' where sales volume increases while the price growth rate slows down.

Author Lee Hyeong-su defined the current tech cycle as a revolution occurring on a 10-year scale and analyzed that, from an asset market perspective, it has already entered the latter half of the cycle. Lee explained, "The asset market began moving in 2023, and it is transitioning from the 'P (Price) cycle' where prices led the way to the 'Q (Quantity) cycle' where volume leads." He viewed that since this 10-year cycle began in 2023, opportunities for asset growth could continue until the first half of next year.

The core reason Lee views this cycle differently from the past is the structural change in supply and demand. In the past, memory semiconductors were 'commodities' that reacted sensitively to the economic trends of consumer electronics (B2C) such as smartphones or PCs. However, current demand has a strong infrastructure character led by 'hyperscalers' developing generative AI. Lee explained that because infrastructure has maintenance demand even if the economy worsens, it does not move with extreme sensitivity to economic fluctuations like in the past.

Changes are also being detected on the supply side. In the past, it was centered on commodity products where prices changed rapidly depending on inventory levels, but now the proportion of 'specialty products' tailored to specific uses, such as HBM (High Bandwidth Memory), is increasing. Lee analyzed that "if existing DDR5 lines are converted for HBM production, a cannibalization effect occurs where production volume decreases relative to the same wafer input," and that such supply constraints could support the Q cycle. He added that the spread of specialty products, such as 'sockets' which support CPUs, is changing the supply structure.

Interest Rate Variables and Trump Risk... Diverging Views on the Timing of the Price Peak

Experts' views diverged on when the semiconductor price (P) would reach its peak. Author Lee Hyeong-su predicted that even if the price growth rate slows, the price level itself will be maintained, and a trend of gradually rising toward the peak will continue until mid-next year (the first half of 2027).

On the other hand, CEO Jang Woo-jin warned of variables according to the macro environment. Jang pointed out, "Infrastructure investment has a strong 'CAPEX (Capital Expenditure)' nature that requires financing, making it very sensitive to interest rates," and noted that if the interest rate path becomes uncertain due to political variables such as issues related to former President Trump, the pace of infrastructure investment could be slower than expected. In particular, mentioning that one of the reasons the market was shocked this June was that investment began while cash flow was dried up, he also left open the possibility that the supply-demand mismatch could be quickly resolved due to interest rates, meaning the price peak could arrive earlier than expected.

Professor Kim Kwang-seok raised the possibility of the market having already priced in these factors. Kim analyzed, "The US Nasdaq is showing strength by renewing its previous highs, but one reason the Korean KOSPI is trapped in a box range is that concerns about the price peak are already reflected in the market." Based on the guidance of major companies such as Micron, he cautiously predicted the price peak to be between the fourth quarter of 2026 or the first quarter of 2027 at the latest.

Asset Market Scenarios Brought by the 'Era of Q"

Regarding the market flow after the price peak, experts emphasized that 'growth in Q (quantity)' is the key. Lee Hyeong-su predicted that "the basic premise of the Q cycle is that volume breaks through while prices undergo a soft landing," and that if total growth continues as sales volume increases even if the price growth rate decreases, the asset market could react positively.

The most optimistic scenario is a case where prices do not plunge but rise moderately in the single digits while volume explodes. In this case, the analysis suggests the market could gain even stronger upward momentum than expected. Lee added that since Micron's current gross profit margin reaches 82% and the operating profit margins of the three major memory companies are in the mid-to-high 70% range, it would not be easy for prices to rise much higher from here. He also cited NVIDIA lowering its gross profit margin in its guidance as a reason. Ultimately, the key observation point for the future semiconductor market depends on how much volume can be supplied to the market while minimizing the decline in price.

Source: original video (YouTube)