Chinese chipmakers are posing challenges for South Korean memory chip giants, flooding the global market with legacy chips at half the market price amid slowing demand.

With the price of the older DRAM chips plunging more than 30 percent, market analysts lowered the earnings prospects for Samsung Electronics and SK hynix, the world's top two memory chip makers.

According to DRAMeXchange on Monday, the spot price of 8 gigabyte DDR4 chips for computers fell to $1.35 in November, marking a 35.7 percent decline from $2.1 in July. Between September to November, the price saw its steepest drop of the year, plunging by 20.59 percent.

“The price of DRAM chips is going to drop more than expected toward the end of this year and into early next year. CXMT and JHICC are selling their products at low prices and the chip inventories are building up due to a slowdown in the smartphone market,” Park Yoo-ak, a researcher at Kiwoom Securities, said.

“From the fourth quarter this year through the second quarter next year, the growth rate of supply is anticipated to outpace demand, as suppliers ramp up DRAM production and CXMT increases its shipments.”

Chinese memory chip makers CXMT and JHICC are flooding the market with massive volumes of DDR4 8 GB Dram chips, pricing them at between $0.75 and $1 -- half the price of those sold by competitors in Korea and the US. Coupled with the overall slowdown in the IT device market, this is driving the DRAM chip prices down, industry analysts say.

Since its establishment in 2016, CXMT has been expanding aggressively to become China’s largest DRAM producer in less than 10 years. The company now accounts for about 5 percent of the global memory market.

The overcapacity of DDR4 chips is also impacting the price of DDR5s, as major memory chip makers have shifted their production focus to more advanced memory chips. The price of 16 GB DDR5 chips for computers edged down by 3.7 percent to $3.9 in November from $4.05 in October. When compared to July's price of $4.65, the decline is even sharper at 16.1 percent.

"CXMT’s main products include 17 nanometer and 18 nm DDR4 and LPDDR4, with its latest offerings being 12 nm DDR5 and LPDDR5X, which the company is also developing," TrendForce said. "Its aggressive DRAM expansion could negatively impact sales and profits for Korean memory manufacturers."

Hit by the aggressive pricing strategies from the Chinese rivals, market analysts have lowered earnings prospects for Samsung and SK hynix for the October-December period this year.

For Samsung Electronics, market consensus on operating profit, reported by market intelligence firm FnGuide, has been cut by 33 percent, dropping from 14.7 trillion won ($10.2 billion) to 9.7 trillion won.

The forecast for SK hynix's operating profit has also been reduced by 5 percent, from 8.5 trillion won to 8.09 trillion won.

Since CXMT is exempt from the latest US trade restrictions on the export of advanced chipmaking equipment to China, the Chinese chip giant's rapid expansion is expected to continue unhindered.

"Considering the ongoing economic downturn and the inventory adjustments in the business-to-customer sector that began in the late Q2 this year, the memory industry's lowest point may come in the first quarter of next year," Han Dong-hee, an analyst at SK Securities predicted.

"It is crucial for chipmakers to defend their earnings amid falling prices of legacy products, as the impact of sluggish demand is expected to intensify in the fourth quarter this year through the first quarter next year."