Amid a gradual recovery in the memory market, South Korean memory giants Samsung and SK Hynix are reportedly set to expand their equipment investments significantly next year.

Samsung aims for a 25% increase in investment, while SK Hynix plans to more than double its investment compared to this year, concurrently increasing production capacity, sparking industry attention.

According to South Korean media outlet ETNEWS, both Samsung and SK Hynix are planning to boost semiconductor equipment investments in 2024. Samsung’s investment is estimated at around KRW 27 trillion (approximately USD 20.78 billion), representing a 25% growth, while SK Hynix plans an investment of around KRW 5.3 trillion (approximately USD 4.07 billion), signaling a 100% increase from this year’s investment.

As ETNEWS’ report revealed, in addition to increasing equipment investment, Samsung and SK Hynix have also raised their production capacity targets for 2024. Samsung plans to expand both DRAM and NAND Flash production by approximately 24%, while SK Hynix aims to elevate DRAM output to levels seen by the end of 2022.

Looking at market share, according to TrendForce’s released data, in terms of third-quarter revenue figures, Samsung holds approximately 38.9% market share in DRAM, while SK Hynix stands at 34.3%.

In the NAND segment, Samsung holds approximately 31.4% market share, while SK Hynix stands at 20.2%.

Market concerns arise as the memory industry, which has recently seen relief from the long-standing oversupply pressure due to major manufacturers reducing production, faces the possibility of disruption once again. Amid the rebound in prices, the significant investments planned by the two major South Korean companies are causing apprehension that the memory industry may face new challenges.

Memory industry sources believe that despite Samsung and SK Hynix’s plans to increase semiconductor equipment investment and boost production capacity in 2024, the tool-in still take time. Improving production capacity utilization is not an instantaneous process.

Furthermore, there is a general consensus in the industry that several AI-related applications in the future will require large-capacity memory support. For instance, the expected 3% growth in global smartphone shipments (based on TrendForce’s report) next year is anticipated to contribute to the expansion of demand in the high-value memory market.

TrendForce also pointed out that recent news about memory manufacturers expanding investment and increasing production capacity is primarily driven by the growing demand in the HBM market, rather than capacity expansion for all products.

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(Photo credit: Samsung)

According to Economic Daily News’ report, after a prolonged period of economy downturn, the market has gradually become optimistic about memories. The effective production reduction by the top five memory manufacturers has led to an increase in memory prices.

This, in turn, has prompted downstream module manufacturers to actively increase their procurement efforts, resulting in shortages of certain products. Industry source indicates that manufacturers, including Samsung and Micron, are expressing intentions to raise prices.

Memory Manufacturers Keen to Raise Prices, Future Demand Monitoring Required

On December 7th, Western Digital had sent out price increase notifications to its customers. In the notification, Western Digital stated that the company would review hard drive product pricing weekly, anticipating a price increase in the first half of the coming year.

Regarding flash memory components, the company expects prices to cyclically increase over the next few quarters, with the cumulative increase likely surpassing 55% of current levels.

It’s worth noting that, at present, many in the industry are optimistic about the cessation and rebound of NAND chip prices. However, currently, suppliers are individually notifying customers of adjusted quotes. In this context, Western Digital has directly issued a price increase notice to customers, with an expected remarkable increase, marking the industry’s first comprehensive significant price hike.

Meanwhile, the latest financial reports of many companies in the memory industry chain show significant improvement compared to the previous period.

Samsung Electronics reported a net profit of KRW 5.5 trillion (approximately USD 4.17 billion) in Q3, transitioning from a loss to profitability. In early November, South Korean media Pulse, citing conversations with numerous insiders in the semiconductor industry, reported that as the Q4 inventory clearance phase nears its conclusion, Samsung is considering a sequential price increase of 20% for Q1 and Q2 of the coming year.

On December 11th, SSD controller chip manufacturer Phison announced its performance report for November, with consolidated revenue reaching NTD 5.407 billion (approximately USD 171.8 million), representing nearly a 5% monthly growth.

According to Phison, the total shipment volume of SSD controller chips continued to recover in November. Among them, the total shipment volume of PCIe SSD controller ICs is expected to grow by nearly 40% year-on-year, setting a new record for the same period in history. This further substantiates the news of a significant surge in the memory market.

In the latest financial report from memory module manufacturer ADATA, the company’s consolidated revenue for October was NTD 3.791 billion (approximately USD 120.4 million), reflecting a monthly increase of 13.43% and a year-on-year increase of 39.59%.

ADATA’s Chairman, Simon Chen, recently mentioned that they anticipate the completion of NAND Flash inventory clearance by the end of this year or the end of January next year. There is an expectation that both DRAM and NAND Flash may face supply shortages next year. 

In addition, DRAM manufacturer Nanya Technology observes a price increase in DDR5, while DDR4 prices have stabilized. There is an expectation of a slight improvement in DDR4 and DDR3 prices in the fourth quarter.

NAND Flash spot prices have surged since the end of September, driven by a collective production cut from suppliers. TrendForce analyst Avril Wu recently mentioned that Samsung’s production capacity has reduced by almost half from its peak, indicating that even cost-efficient manufacturers like Samsung can no longer endure losses. It is suggested that the average wafer price has likely passed its lowest point.

From the supply side, recent industry reports indicate that memory manufacturers are employing a “delaying tactic” in the supply of NAND Flash for the fourth quarter. Module manufacturers attempted to finalize orders for millions of chips in September, but memory manufacturers were reluctant to release the products, and even when they were willing, the quantities and prices were unsatisfactory. Meanwhile, Samsung is reportedly pausing quotations and shipments for NAND products.

Looking ahead to the fourth quarter, the estimated average selling price increase for all NAND Flash products is expected to reach 13%, with an overall quarter-over-quarter revenue growth rate of over 20% in the NAND Flash industry.

It is worth noting that according to TrendForce analyst Avril Wu, with demand not showing explosive growth, the market will be focused on three key considerations. First, after production cuts, the decline in memory manufacturers’ inventory levels has begun, but it remains to be seen whether inventory can continue to shift towards buyers.

Second, it is anticipated that memory manufacturers’ production capacity will slowly increase, and if the market warms up, an early resumption of capacity could lead to supply-demand imbalances again. Lastly, whether end-demand can meet expectations for a recovery, with a particular focus on the sustained orders related to AI, will be crucial.

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(Photo credit: Samsung)

As reported earlier, the global provider of outsourced semiconductor packaging and test services, Amkor, has been set to establish its presence in Arizona, USA, providing advanced packaging services for Apple chips manufactured by TSMC.

According to reports from South Korean media, the alliance formed among Apple, TSMC, and Amkor may pose a significant challenge to the South Korean semiconductor giant, Samsung Electronics, potentially creating competition for contracts and drawing close attention from the industry.

Amkor released a statement on November 30, announcing the establishment of the new facility in Peoria, northwest of Phoenix, Arizona. The construction is expected to commence in the second half of 2024, focusing primarily on advanced packaging requirements for high-end chips related to IoT, automotive electronics, 5G, artificial intelligence (AI), and high-performance computing (HPC). The facility has already secured orders from major players, with Apple being its first and largest customer.

Coincidentally, TSMC is also in the process of constructing an advanced process semiconductor wafer facility in Phoenix. 

TrendForce’s research has indicated that the current maximum capacity plan for TSMC’s Arizona plant is around 50,000, with 20-30,000 allocated for 4nm and 3nm each. It is anticipated that the expansion to this scale will only occur after 2027. This capacity is expected to cater to a limited number of domestic customers in the United States who require fully American-made semiconductor products.

Business Korea’s report also suggests that the alliance formed among Apple, TSMC, and Amkor may impact Samsung. Samsung’s second wafer facility in the U.S., located in Taylor City, Texas, is anticipated to start production in the second half of 2024, setting the stage for potential chip procurement battles with TSMC.

Speculations have arisen about Samsung possibly establishing a testing and packaging facility in Taylor City, following the strategy of strengthening vertical integration to enhance competitiveness and gain an advantage in chip procurement.

In November of this year, Samsung unveiled a new strategy called “GDP,” focusing on Gate-All-Around (GAA) transistor technology, DRAM, and 3.5D advanced packaging. The company has pledged to achieve a goal where more than half of its wafer foundry revenue comes from AI chip orders within five years.

(Photo credit: TSMC)

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According to South Korean media Chosun Biz’s report, the prices of all memory products, encompassing servers, mobile devices, and PCs, are on the rise. This trend, combined with the thriving development of the AI market, is expected to result in even higher profitability for High-Bandwidth Memory (HBM) than initially anticipated.

Major memory manufacturers Samsung and SK Hynix are beginning to emerge from a business downturn, leading to upward revisions in their financial outlook for the fourth quarter of 2023.

The report notes that the adjustments in Q4 financial outlook by Samsung and SK Hynix indicate a rapid increase in demand for HBM due to the thriving AI market. Additionally, the recovery of the largest sales item, DRAM, is contributing to better operational performance for both companies in the fourth quarter.

Market experts reveal that Samsung’s projected operating profit for Q4 is expected to be KRW 3.487 trillion, showing slight growth compared to the estimate from a week ago. As for SK Hynix, the expected loss in Q4 is KRW 294.4 billion, reflecting a convergence from the market estimate of KRW 335.3 billion a week earlier, despite remaining in a deficit.

In addition, Micron, the American company considered one of the three major global DRAM manufacturers along with South Korean companies Samsung and SK Hynix, has also revised its financial forecast for the first quarter of the 2024 fiscal year.

The initial estimate in November of USD 4.4 billion has been adjusted to USD 4.7 billion , while the expected Earnings per Share has been raised from USD -1.07 to USD -1.

Regarding trends in the memory industry, TrendForce indicated in a recent report that a key turning point in the third quarter for the NAND Flash market was Samsung’s decision to actively reduce production.

Previously, buyers maintained a low inventory and slow procurement strategy due to concerns about low visibility of end demand and worries about a lackluster market peak season. With the leading supply-side companies significantly reducing production, buyers, anticipating a significant reduction in supply, have shifted to a more positive procurement attitude. By the end of the third quarter, contract pricing for NAND Flash had shifted toward stabilization and even price increases.

TrendForce predicts that NAND Flash products will experience both increased volume and prices in the fourth quarter. The average selling price for all products is estimated to increase by 13%, and the overall revenue growth for the NAND Flash industry in the quarter is expected to exceed 20%.

Contrarily, in the case of DRAM, prices have been on a downward trend since 2023, but they started to rise from October. TrendForce believes that the three major global DRAM manufacturers have begun intensive production cuts, and as market demand begins to recover, the pricing power of memory manufacturers is gradually increasing.

In terms of DRAM supply in the fourth quarter, memory manufacturers have a clear upward pricing attitude, as TrendForce projects a noticeable increase of approximately 13-18% in contract prices during this period. However, the recovery in demand is not as strong as in previous peak seasons.

Overall, while there is demand for stocking up, in the current scenario, the server sector remains passive in terms of procurement due to high inventory levels. The shipment growth in the DRAM industry for the fourth quarter is expected to be limited.

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(Photo credit: Samsung)

Following the Singles’ Day Sale in China, demands are relatively cooled down. While for DRAM spot prices, market experiences fluctuations due to subdued demand and increased supply of used chips. In contrast, NAND spot price remains relatively strong under the ongoing reduction in supply.

DRAM Spot Market

Following the Singles’ Day promotional events in China, demand has cooled down compared with the previous few weeks. Looking at DRAM spot prices, prices for chips from suppliers have remained steady, but there has been an influx of used chips stripped from decommissioned modules. Spot prices of used DDR4 chips have now fallen to US$1.05, significantly lower than the spot price of around US$1.75 for new chips from suppliers. Spot prices of DDR5 chips, on the other hand, have remained relatively stable. However, Kingston has not raised module prices, making it difficult to sustain the upward momentum. The average spot price of mainstream chips (DDR4 1Gx8 2666MT/s) rose by 1.54% from US$1.683 last week to US$1.709 this week.

NAND Flash Spot Market

Demand from the spot market has become even more enervated after China’s Double 11 shopping festival when compared to that of several weeks ago. In terms of spot prices, the mainstream 512Gb wafer is supported by suppliers’ ongoing diminishment of wafer provision, and continues to march towards US$2.7-US$2.9 at a relatively robust tendency in comparison with DRAM spots, despite poor demand. 512Gb TLC wafer spots have risen by 11.54% this week, arriving at US$2.862.