SEC’s 2021 DRAM Capacity Investment to Increase

The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed. 

 

In an effort to resolve foundry supply shortages, GlobalFoundries is to hike its 2021 investment to US$1.4bn (+100% y-y). Elsewhere, SEC is increasing 2021 DRAM capacity investment versus previous plans in light of strong market conditions.

GlobalFoundries’ 2021 capex to expand 100% y-y

In 2021, GlobalFoundries (the fourth-largest foundry player) is to invest US$1.4bn in capacity expansion—a 100% hike from its 2020 level. Investment costs are to be shared by customers hoping to secure chip allocation. Backed by strengthened investment, GlobalFoundries’ capacity should climb 13% y-y in 2021 and 20% y-y in 2022. Amid short foundry supply, investment by foundry companies has been accelerating as of late. We expect fabless plays and set makers, both of which have been negatively affected by chip shortages, to benefit. Plans for greater investment are also positive for equipment makers such as ASML, Applied Materials, and Lam Research.

Meanwhile, Samsung Electronics (SEC) is working on plans to expand its foundry in Austin, US. According to investment plans submitted to the Austin City government, total investment is sized at US$17bn, out of which US$5bn is to be invested in facilities and US$9.9bn is to be used for the purchase of manufacturing equipment (mainly EUV equipment essential for 3nm and below processes). Construction is expected to commence following subsidy negotiations (eg, regarding tax benefits) between SEC and the US government.

SEC’s 2021 DRAM capacity investment to increase

Amid a DRAM industry upturn, SEC’s DRAM investment is likely to rise as well versus previous plans. DRAM contract prices should widen 5% q-q in 1Q21 and 13% q-q in 2Q21. With a stronger-than-forecast DRAM market turnaround being confirmed, we see strong chances of a 2H21 supply shortage. In response, SEC is likely to hike its capacity investment from 40K wpm to 50K wpm.

Server investment should pick up in earnest from 2Q21, led by North American hyperscalers. Of note, Google plans to build new cloud regions in Qatar and Madrid this year. Affected by strong cryptocurrency mining demand, demand for GDDR5, GDDR6, and PC DRAM is also robust.
 

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