Reduction of DRAM Investment
Samsung Electronics Co. has officially announced to reduce its investment in DRAM this year. Until now, there have been rumors that major semiconductor firms, including Samsung Electronics, will reduce the DRAM investment. However, it is the first time for Samsung Electronics to directly reveal its DRAM investment reduction plans.
According to Samsung Electronics and investment banking industry sources on June 20, Samsung Electronics held investor relations (IR) events for institutional investors in the U.S. and Korea last week and this week.
At the IR event held in New York and Boston from the 14th to 16th (local time), investors paid attention to 3D NAND flash, organic light-emitting diode (OLED) and smartphone sales performance. In particular, Samsung Electronics revealed its plan to reduce the investment in DRAM at the event for the first time this year.
The company’s NAND flash business is a cash cow which can make up for sluggish sales in the DRAM sector and boost total sales in the semiconductor sector. Samsung Electronics significantly increased margins in the NAND flash sector this year through steady cost reduction. Its operating margins in the NAND flash sector will grow from 17 percent last year to 25 percent this year.
As global NAND flash manufacturers, such as Intel and SK Hynix, have recently increased the investment in 3D NAND flash production facilities, Samsung Electronics is expected to expand the investment in its production facilities to lose its competitors.
Considering the fact that the NAND flash memory capacity of its new smartphones to be released in the second half of the year will be doubled, the construction of its new NAND flash production lines is inevitable.
Samsung Electronics is preparing for the winner-take-all system in the NAND market. The company has the V-NAND flash production lines in Xi'an, China, and it is considering using the 17th line at the Hwaseong plant as the 3D NAND-only line. Most industry watchers believe that it will produce 3D NAND flash chips at its plant in Pyeongtaek, which will start operation in the middle of next year.
An official from Samsung Electronics said, “We haven’t decided what to produce at the Pyeongtaek plant yet. Since there is a lot of volatility in the semiconductor market, we will watch market conditions until the first half of next year and decide what to manufacture at the last minute.”
Samsung Electronics ranked top with a 31.6 percent share in the NAND flash market as of the end of last year, followed by Toshiba with 18.3 percent, SanDisk with 17.6 percent, Micron with 13.4 percent, SK Hynix with 10.7 percent, Intel with 7.5 percent, Macronix with 0.7 percent and Powerchip with 0.2 percent. The NAND flash market is relatively crowded with competitors than the DRAM market.
Samsung Electronics said, “The demand of solid-state drive (SSD) is increasing, based on 3D NAND flash chips for enterprise (server and storage). Also, the demand of SSD is rapidly changing as the price difference with hard disk drive (HDD) is decreasing due to cost reduction from technology improvement.” Investors had low expectations for 3D NAND flash until last year but they are welcoming such changes this year.
In addition, they were interested in OLED investment and flexible display technology. Lee Sae-chul, an analyst at NH Investment, said, “Investors expects that smartphones using flexible OLED displays can be a game changer when they can support tablet functions at the same time. They had particularly higher expectations for foldable smartphones than expected.”
As Samsung Electronics seeks to maximize the profitability in the smartphone market, which has entered the maturity, rather than to expand its market share, investors in the U.S. positively rated the performance improvement in the IT and mobile (IM) division.
Meanwhile, Samsung Electronics focused on the next-generation Internet of Things platform ARTIK, quantum dot and semiconductor packaging at the IR event for institutional investors held at Conrad Hotel in Yeouido, Seoul.