SK Hynix has decided to lower the proportion of legacy (old) DRAM to 20% by the end of the year. The aim is to drop it by half compared to the end of June (about 40%). There is an explanation that K Semiconductor is starting a ‘major strategy shift’, as Samsung Electronics mentioned ‘changing some DRAM production’ in its third quarter performance meeting. There is research that the company is significantly reducing the business that was once considered a source of stable profit due to the pursuit of China, thus hitting a ‘drain camp’ for investment in new semiconductors. technologies that will lead the era of artificial intelligence (AI), such as high-bandwidth memory (HBM).
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According to the semiconductor industry on the 1st, SK Hynix increased the production share of double data rate 4 (DDR4) and low power (LP) DDR4 from 40% in the second quarter to 30% in the third quarter at a meeting with investors global bank (IB) Goldman Sachs at the end of last month After they went down to , they announced plans to reduce it by 20% in the fourth quarter. In its latest report, Goldman Sachs assessed that “SK Hynix is significantly reducing its exposure to general purpose DRAM. ” DDR4 is an older standard DRAM that was commercialized in 2012 and is used in low-end smartphones and PCs.
Although the intensity is different, Samsung Electronics has also reduced its general purpose semiconductor division as a fait accompli. Kim Jae-jun, head of strategic marketing (vice president) of Samsung Electronics’ memory division, announced the production reduction strategy in a conference call on the 31st of last month, saying, “For some general products, production of both DRAM and NAND flash will be adjusted down to meet market demand. “
The reason why Korean companies have started to prepare an ‘exit strategy’ like this is largely due to the offensive increase made by Chinese memory companies such as Changshin Memory Technology (CXMT). According to market research firm Trend Force, China’s DRAM market share forecast for the fourth quarter of this year was 11.8%, up 1.7 percentage points from the first quarter’s share (10.1%).
As Chinese companies increase their influence in the global semiconductor market, the prices of general products are falling every month. The fixed transaction price of general purpose NAND (128 gigabit MLC) fell by 11.4% in September and 29.2% in October compared to the previous month. The price of general purpose DRAM (DDR4 8 gigabit) also fell 17.1% in September. In the industry, it is noted that Samsung Electronics and SK Hynix will be in a ‘dangerous position’ if they do not widen the gap in the AI memory market, which China cannot produce.
Hynix Reduces Share of Older DRAM Production by 20%… Win with ‘AI semiconductors’
China’s market share will rise to 16% next year … Korean memory profit worsens due to low-price offensive
“Chinese suppliers have accelerated their entry into the general purpose market, increasing the negative impact on supply and demand.” (SK Hynix performance information on October 24)
Although the performance in the artificial intelligence (AI) memory market such as high bandwidth memory (HBM) has been surpassed by the performance in the high bandwidth memory (HBM) market, the current analysis is that the Korean semiconductor industry is facing a ‘big threat’. This is due to the offensive of Chinese memory semiconductor companies known as ‘Red Tech’. Chinese companies such as Changshin Memory (CXMT) are making a low price and volume attack in the market for general products such as DDR4 (Double Data Rate 4), which are easy to install.
It is a typical Chinese tactic to turn the market into a ‘red ocean’ to outsmart competitors and, in the meantime, gain competitiveness in modern products as well. Concerns are growing that warning lights will come on for AI memory hegemony in the medium and long term as it loses out to China in the general product market, once a source of cash ‘.
○ Domestic NAND operating rate at 70%
SK Hynix’s general-purpose semiconductor production reduction strategy is not limited to DDR4. At the DRAM factory in Wuxi, China, work is underway to switch from the 10-nano 3rd generation (1z) DRAM developed in 2019 to the 10-nano 4th generation (1a) DRAM, which is classified as a new product. In the case of general purpose NAND flash, it was decided to continue to control supply without increasing the level of domestic factory activity, which had fallen to 70-80%, for a long time. This is to control the supply of NAND flash until demand is determined. Samsung Electronics is also active in its exit strategy. At a recent briefing, Kim Jae-jun, vice president of Samsung Electronics’ memory division, said, “We will reduce the proportion of DDR4 and low power (LP) DDR4 based on old processors.”
Korean memory companies are pulling out of the general purpose product market primarily due to a slowdown in demand. It is known that as the smartphone and PC markets are slow, orders for general purpose memory are decreasing and inventory is piling up. In addition, the low volume offensive by Chinese memory semiconductor companies such as CXMT and Yangtze Memory (YMTC) makes the situation worse. CXMT, a DRAM company launched in 2016, has been expanding its production capacity based on domestic demand since 2020 when US sanctions against China began. DRAM production capacity, which was around 40,000 units per month (based on wafers) in 2020, increased to 160,000 units per month (10% global share) as of last September, ranking fourth in the world.
The dominance of Chinese companies in the market is expected to grow. Recently, Chinese smartphone manufacturers such as Xiaomi and Transian began installing low-power CXMT 12Gb (gigabit) mobile DRAM, LPDDR5. YMTC created the latest product, 232-layer NAND flash, and developed a data storage device, a solid state drive (SSD). Market research company Trend Force recently published a report predicting that the global memory market share of Chinese companies in the fourth quarter of next year will be 16.1%, up 4.3 percentage points compared to the fourth quarter of the year this (11.8%).
○HBM4, eSSD game winner
Korean companies are reducing the production share of general purpose DRAM and NAND flash, which have become red oceans, while accelerating the conversion of production resources to the latest AI memory. This is because they believe that they can only survive by taking the lead in the newest markets that China cannot access and widening the gap.
SK Hynix, which is in first place in the world in the HBM market (52.5%), has decided to increase next year’s supply to double this year’s level. This is because the global HBM market is expected to grow rapidly to $40 billion (about 55 trillion won) next year. In the 6th generation HBM (HBM4), which opens in the market next year, it was decided to focus on the HBM4 in general, which increased the speed of data processing by doubling the input terminals. input / output (I / O). As for enterprise solid-state drives (eSSD), which are considered essential for AI servers, the production rate of the Dalian NAND flash plant in China, which is the production base, has been maintained at 100%.
Samsung Electronics also changed its strategy to increase investment in high-value products such as HBM, eSSD, and LPDDR5. Regarding HBM4, we are undertaking a project to develop customized products for our customers by taking advantage of our strengths in design and production. Most of next year’s semiconductor investment (about 48 trillion won) is expected to be invested in AI memory resource investment and research and development.
Reporter Hwang Jeong-soo/Park Eui-myeong [email protected]
2024-11-01 08:50:00
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