Following last year’s memory semiconductor downturn, Samsung Electronics and SK hynix are aggressively increasing their focus on DRAM through the expansion of advanced processing. This move is anticipated due to the expected rise in orders for High Bandwidth Memory (HBM) and Double Data Rate 5 (DDR5), driven by robust Artificial Intelligence (AI) demand.
However, the outlook for NAND flash remains similar to last year’s tight stance, mainly due to the majority of investments being directed towards advanced DRAM amid a still tepid actual demand recovery. Samsung Electronics, having continued with significant capital investments last year, appears to leverage the restricted investments of competitors as an opportunity to enhance its competitive edge in advanced processing.
Samsung Electronics and SK hynix are considering increasing the input of semiconductor wafers in their factories, taking into account the recent rebound in DRAM prices. This is to expedite the transition to the 10-nanometer (nm) 4th generation (1a) and 5th generation (1b) versions for the production of high-value products such as HBM, DDR5, and Low Power (LP) DDR5. However, as the semiconductor industry continues to reduce inventory of DDR4 and focuses investment on finer processes where supply growth is slow, the overall increase in DRAM supply this year is expected to be limited.
Samsung Electronics plans to significantly increase DRAM wafer inputs, powered by the full-scale operation of its Pyeongtaek Plant 3 (P3), this year. With substantial production adjustments centered around legacy DRAM initiated in the latter half of last year, a gradual normalization of operation rates by the end of this year is anticipated.
SK hynix is focusing on expanding advanced process production volumes primarily at its M16 and M14 facilities in Korea. The company is also speeding up the transition to advanced processes at its Wuxi plant in China, following the shift to a comprehensive permit system for U.S. semiconductor equipment export controls in October last year. With the import of cutting-edge Extreme Ultraviolet (EUV) lithography equipment still banned in China, SK hynix is reportedly considering conducting separate EUV processes in Korea.
The reason behind Samsung Electronics and SK hynix’s emphasis on expanding the share of advanced processes is the expected continued strong demand for high-value DRAM this year. HBM, used alongside AI semiconductors, is set for a significant supply expansion of its 4th generation (HBM3) and the commencement of new mass production of its 5th generation (HBM3E). DDR5, currently installed in AI servers and personal computers, is expected to start transitioning to general servers from this year.
After halving the wafer input for NAND flash factories at the end of last year compared to the beginning, Samsung Electronics continues to pursue an aggressive NAND flash reduction strategy, focusing on 128-layer (6th generation). The company is pushing for a direct transition to 236-layer (8th generation), skipping intermediate generations due to significant price drops and sluggish sales of older-generation NAND flash.
SK hynix also plans to proceed with a process transition centered on the 238-layer this year. However, analyses suggest that aggressive expansion of NAND flash advanced processing might be challenging due to last year’s capital investments being heavily concentrated on expanding HBM production capacity.