Despite the favorable prospects for High Bandwidth Memory (HBM) driven by NVIDIA, concerns are rising as Samsung Electronics and SK hynix continue to experience an upward trend in their inventory assets. The majority of this inventory consists of the older Double Data Rate (DDR) 4, making it challenging for both companies to quickly reduce their stockpiles.
According to the Financial Supervisory Service’s electronic disclosure system (DART), Samsung Electronics’ inventory assets for the first half of this year amounted to 55.5 trillion won (US$41.53 billion), showing a 6.3 percent increase, or 3.33 trillion won (US$2.49 billion), from 52.19 trillion won (US$39.05 billion) at the end of last year. During the same period, SK hynix’s inventory assets increased by 4.6 percent, rising from 15.66 trillion won (US$11.72 billion) to 16.42 trillion won (US$12.29 billion).
Recently, the domestic memory industry anticipates a surge in artificial intelligence (AI) semiconductor demand driven by NVIDIA. This is due to the growth of the generative AI market, which is expected to lead to a significant increase in demand for high-performance memory HBM integrated into graphics processing units (GPUs). In fact, NVIDIA, propelled by strong performance, is reportedly planning to increase its production of high-performance GPUs for AI by up to four times starting next year. HBM is widely incorporated into GPUs used in the field of AI.
As a result, expectations for improved performance from Samsung Electronics and SK hynix, both of which produce essential HBM for AI semiconductors, are on the rise. In reality, the HBM market is largely dominated by the two Korea-based companies. The issue lies in the fact that the majority of the inventory assets of both companies are in the form of DDR4 DRAM, an older type of memory. Recently, memory companies have been reducing the production of DDR4 due to concerns of oversupply, but there still exists an excess of inventory in the market compared to demand. Some analysts believe that the positive news from NVIDIA may not directly lead to a resolution of the inventory issue for the companies.
Ultimately, the surging demand for HBM driven by generative AI trends is significant. However, there is an expectation that semiconductor industry conditions will truly rebound only when demand for general-purpose PCs recovers. To achieve an overall industry recovery, it is pointed out that a multifaceted demand recovery beyond AI or supercomputers is necessary.
According to market research firm DRAMeXchange, the average fixed transaction price of general-purpose PC DRAM products decreased from US$2.21 (2,954 won) in December of last year to US$1.30 (1,737 won) in August of this year. This marks a 2.99 percent decline from July of US$1.34 (1,791 won). While DRAM prices experienced a significant decline in the first half of the year, the rate of decline has slowed in the second half. However, some experts caution that it’s challenging to interpret this as a clear signal of recovery, given the lackluster demand.
In the securities industry, there are observations suggesting a potential rebound in DRAM prices in the fourth quarter. KB Securities has forecasted that the fixed transaction prices for both DRAM and NAND in the fourth quarter will rise simultaneously. This expectation is based on the ongoing semiconductor inventory adjustments by smartphone and PC companies, coupled with supply reductions due to production cuts, which could help alleviate supply imbalances.
Some in the industry are predicting that Samsung Electronics and SK hynix may maintain a high level of inventory for the time being due to the sluggish demand recovery for DDR4. This analysis is based on the fact that the majority of the inventory consists of older products such as DDR4. Therefore, even with increased demand for newer products like HBM and DDR5, it’s expected that the inventory levels may not decrease dramatically.