Supplies 176-layer NAND Flashes Ahead of Samsung and SK Hynix

Micron Technology has begun to supply 176-layer NAND flashes to customers ahead of Samsung Electronics and SK Hynix.

Korean memory semiconductor companies are facing a tough challenge from competitors, especially from Micron Technology of the United States

Micron, the world's fifth-largest NAND flash maker, began to supply 176-layer NAND flashes to customers for the first time in the world in November 2020. It is a product that Samsung Electronics and SK Hynix cannot even mass-produce yet. Furthermore, Micron announced in January that it has started to mass-produce 4th-generation 10nm DRAMs. This was also the world’s first.

Although Samsung Electronics and SK Hynix jointly accounted for 71 percent of the DRAM market and 45 percent of the NAND flash market as of the fourth quarter of 2020, the fact that they have lost the world's first title to Micron twice in a row reflects that their technological leadership is under threat. Until a year or two ago, Samsung Electronics was technologically ahead of Micron by about two years.

For example, Samsung Electronics mass-produced 96-layer V-NAND flashes in July 2018 and SK Hynix 128-layer 4D-NAND flashes in June 2019 for the first time in the world. Micron started producing 128-layer NAND flashes in the second quarter of 2020. Samsung Electronics also took the first titles related to 1st- to 3rd- generation 10-nm DRAMs. But now, many experts are not quite sure that the Korean semiconductor industry will keep its No. 1 position for a long time.

The biggest reason for the narrowed technology gap is that it is much more difficult for the top-ranked company to take a step forward than for latecomers to take ten steps forward as the ultra-micro fabrication process has neared its limit. Until now, Samsung Electronics has spent trillions of won and more than a year on research and development (R&D) to develop new technologies. Latecomers caught up with Samsung Electronics with much less investment and time because they could refer to Samsung Electronics’ technical roadmap.

Analysts say that Korean companies have an edge in cost competitiveness and facility investment, but some say that Micron and others have recently narrowed the gap. Cost competitiveness can be measured by operating margins. In 2019, Micron’s operating margin stood at 19.5 percent, which is lower than Samsung Electronics’s 21.6 percent but nearly twice as high as SK Hynix’s 10.1 percent. Although Samsung Electronics' operating margin was 25.8 percent in 2020, SK Hynix’s operating margin of 15.7 percent was not much different from Micron’s 15.2 percent.

Experts predict that differentiation in the size of investment in facilities will be weakened, too. Recently, governments of major countries such as the United States and the EU are preparing more than 100 trillion won in funds to foster their semiconductor industries. A case in point is that the EU will invest 180 trillion won by 2030. Some analysts expect that Micron will also receive full support from the U.S. government in accordance with the United States policy of promoting strategic as strategic weapons.

It is not easy for Samsung Electronics to lean on the Korean government. According to a report released in June 2020 by the Federation of Korean Industries, China's SMIC received government support which equaled 6.6 percent of its total sales from 2014 to 2018. Government support for Micron also accounted for 3.3 percent of its total sales. Samsung Electronics and SK Hynix recorded only 0.8 percent and 0.5 percent, respectively.

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