SK hynix, the South Korean memory giant, has revealed plans to consider increasing production of specific DRAM in the first quarter due to improved market conditions. Concerns arise in the market regarding the potential resurgence of capacity utilization, challenging the consensus among memory manufacturers to reduce production for price enhancement, possibly hindering the upward trajectory of DRAM in the future.

According to a report by the Commercial Times, industry experts believe that major memory manufacturers, including Samsung, SK hynix, and Micron, are upgrading their production capacities to 1-alpha/beta advanced processes to meet the demand for more profitable DDR5 and High Bandwidth Memory (HBM). The outlook for niche DRAM product in the future is expected to remain positive.

SK Hynix CEO Kwak Noh-jung previously stated at the 2024 CES in Las Vegas that the company is considering increasing production of specific DRAM in the first quarter due to improved market conditions. Kwak mentioned that while the worst conditions for NAND Flash should be over, the industry’s recovery is slower. Therefore, any decision to increase production would likely be considered after the mid-year point.

Following this announcement, some industry insiders expressed concerns about the potential increase in memory manufacturers’ DRAM capacity utilization, which could negatively impact the future pricing trend of DRAM.

However, according to the Commercial Times, quoting a key figure in the Taiwanese memory industry revealed that SK Hynix’s planned increase in production primarily focuses on HBM for AI applications, with a slight increase in DDR5, while the production of DDR4 will continue to decrease.

As the three major manufacturers focus on 1-alpha/beta processes, increasing the supply of DDR5 and HBM, the pricing of niche-type DRAM is expected to gradually improve amid capacity constraints. Therefore, the perceived impact of SK Hynix’s increased production of specialized DRAM on the overall future DRAM pricing is not anticipated to be negative.

TrendForce points out that, considering the need for more advanced equipment to produce increased quantities of HBM and DDR5, the production capacity for DDR3 and DDR4 in the first quarter of 2024 is expected to decrease compared to the previous year.

However, due to market considerations and the ongoing shift towards DDR5 for high-end products, the demand for DDR3 and DDR4 is expected to slow down. This distribution of production capacity aligns with market trends and developments.

Tracking back the memory prices, from the fourth quarter of 2022 to the third quarter of 2023, the memory market experienced a downturn, prompting Samsung, SK Hynix, and Micron to collectively reduce production. By the fourth quarter of 2023, DRAM and NAND flash memory prices finally began to rebound, continuing into the first quarter of 2024, with the momentum of price increases continuing to be closely monitored by the market.

(Image: SK hynix)

In response to the recovery in the memory market and the increasing demand for High Bandwidth Memory (HBM) driven by AI chips, South Korean memory giant SK Hynix is reportedly planning to upgrade part of its DRAM production equipment at its Wuxi plant to the fourth-generation of 10-nanometer process this year.

According to a report by Seoul Economic Daily, the Wuxi plant is a core production base for SK Hynix, contributing approximately 40% of its total DRAM production. Currently, the Wuxi facility is producing second and third-generation DRAM, which falls under the category of older products in the late 10-nanometer class.

As the semiconductor market enters a recovery phase, the expansion of SK Hynix’s high-performance chip capacity has become urgent. To maintain its market share in the High Bandwidth Memory (HBM) market, SK Hynix needs advanced products such as the fourth-generation of 10-nanometer DRAM or higher versions.

According to a previous TrendForce press release, in terms of competitive positioning, SK Hynix’s HBM3 products are leading other manufacturers and serve as the primary supplier for NVIDIA Server GPUs. Samsung, on the other hand, focuses on meeting orders from other cloud service providers.

SK hynix’s fifth-generation HBM (HBM3E), which began mass production in the first half of this year, has a maximum capacity of 36GB (288Gb) in its next-stage product. It achieves this through stacking 12 chips of 24Gb DRAM. In 2022, SK hynix first adopted the fourth-generation DRAM process to realize 24Gb DRAM. HBM3E requires the use of the fourth generation or higher versions of the DRAM manufacturing process to meet customer demands.

SK Hynix, in response to increasing HBM3E orders from key customers like NVIDIA, must find ways to convert the Wuxi DRAM process in addition to utilizing the capacity of its Icheon headquarters factory.

SK Hynix has been using Extreme Ultraviolet (EUV) lithography since the production of the fourth-generation of 10-nanometer DRAM. However, due to the inability to introduce EUV exposure equipment to Wuxi, the production of this DRAM becomes challenging. Notably, constrained by U.S. restrictions on the export of EUV exposure eqipment to China, transitioning the Wuxi plant to the fourth-generation of 10-nanometer DRAM and beyond will pose a significant challenge.

The report indicates that SK Hynix plans to complete part of the fourth-generation DRAM process on the Wuxi production line, then transport the chips to the Icheon plant for EUV application, and finally return them to Wuxi to complete the entire process. SK Hynix has experience with a similar approach during the Wuxi plant fire in 2013, overcoming disruptions in DRAM production.

Regarding the rumors about the Wuxi plant upgrade, SK Hynix stated that it cannot confirm the specific operational plans for the factory.

(Image: SK Hynix)

The recovery of the memory industry is evident, with Taiwanese companies such as Macronix, Nanya Technology, and Transcend all showing month-on-month revenue growth in December last year. Additionally, contract prices for DRAM and NAND Flash are expected to continue rising in the first quarter of 2024. However, the global second-largest memory manufacturer, SK Hynix, plans a expansion, introducing a variable element to the memory market.

According to a report by the Commercial Times, SK Hynix disclosed that it might reduce the scale of DRAM production cuts in the first quarter, while adjustments to the NAND Flash production strategy may occur in the second or third quarter, depending on the situation.

In response to major memory manufacturers’ expansion plans, Taiwanese memory firms believe that Hynix’s expansion should focus primarily on DDR5 and HBM (High-Bandwidth Memory) products. Nevertheless, Taiwan currently specializes in DDR4 products, and it is not expected to impact product pricing.

According to a press release from TrendForce published this week, the DRAM contract prices are estimated to increase by approximately 13–18% in 1Q24 with mobile DRAM leading the surge. It appears that due to the unclear demand outlook for the entire year of 2024, manufacturers believe that sustained production cuts are necessary to maintain the supply-demand balance in the memory industry.

For consumer DRAM, manufacturers are aggressively raising contract prices, which has prompted buyers to stockpile early. This has greatly improved purchasing momentum. However, the first quarter coincides with the industry’s off-season, and end sales are expected to be weak and lead to increased inventory levels due to buyers’ early stocking strategies.

Manufacturers generally believe that in 2024—with the expanding penetration of HBM and DDR5 each quarter—low-margin DDR4 capacity will be crowded out, thereby leading to shortages. As such, DDR4 contract prices are expected to outpace DDR3 in the first quarter by 10–15%. DDR3 continues to be supplied by Taiwanese manufacturers, and with generally high inventory levels, its contract price increase is estimated at 8–13% for 1Q24.

(Image: SK Hynix)

Pei-Ing Lee, the General Manager of Nanya Technology, a major DRAM manufacturer, mentioned on January 10th that this year has seen an upward trend in DRAM prices

According to Economic Daily News citnig from Nanya Technology’s earnings call for 23Q4,  this trend is attributed to the resurgence of the smartphone market, increased demand fueled by AI, and the three major memory manufacturers pivoting towards DDR5 production. This shift is advantageous for depleting DDR4 inventory and could potentially result in a supply shortage.

Having endured over a year of downturn in the memory market, Lee expressed an optimistic outlook by stating that “there is a possibility of future supply shortages,” revealing an overall positive trajectory for the DRAM market.

Lee acknowledged that the DRAM market faced challenges last year, resulting in stagnant bit sales for Nanya Technology. However, he anticipates a better scenario this year, noting the upward trend in DDR4 pricing. The timing for DDR3 price increases is expected to follow but at a slower pace. Lee further stated that DDR3 constituted about 40% of Nanya Technology’s revenue  in the past, but it is expected to decrease, with DDR4’s share rising.

Due to major international players focusing on High-Bandwidth Memory (HBM) and DDR5, he anticipates a potential supply shortage for DDR4 this year.

Lee pointed out that the growth in AI demand is positively impacting the DRAM market. The shift from high-end HBM and DDR4 to DDR5 is influencing demand, showing improvement quarter by quarter.

Regarding pricing trends, he confirmed a rebound in prices in the fourth quarter of 2023 and expressed optimism for a gradual upward trend in 2024. However, Lee cautioned that external variables such as geopolitical tensions, the war in Europe, and the U.S.-China trade dispute could still impact the market’s recovery momentum.

In terms of demand, Lee highlighted four key points. Firstly, server demand is driven by AI servers, with a focus on observing IT spending by U.S. cloud companies. Secondly, the introduction of new smartphones, leading to an increase in average DRAM capacity, especially in AI smartphones boosting the high-end smartphone market. Presently, improving smartphone sales in China are observed, and the recovery momentum of the Chinese economy is crucial.

In the PC application sector, Lee mentioned that inventory is gradually returning to normal levels, and AI PCs will simultaneously boost the high-end PC market. As for consumer electronic terminal products, demand for IP cameras, networking, industrial control, and automotive applications is relatively healthy, with consumer electronic products expected to show stable growth in 2024.

In terms of technological advancements, Nanya Technology aims to begin small-scale production of DDR5 products at the end of the third quarter of this year. Initially applied in servers and partly in PCs, the first product is expected to achieve a bandwidth of 5600MHz, while the second product is currently in the design phase, with an estimated bandwidth of 6400MHz.

Lee explained that their second DDR5 product will utilize third-generation processes, aiming to further improve cost structures, increase speed, achieve a target of 6400 MHz, and possess the capability for high density and 3D IC technology.

Read more

• [News] Nanya Tech Expects Continued Conservative Spending to Balance DRAM Supply-Demand in 2024
• [News] After Memory Price Hike, Shortages Emerge in Some Products?

(Photo credit: Nanya Technology)

Based on TrendForce’s weekly memory spot price trends released every Wednesday, due to the year-end holiday period, the spot market for DRAM and NAND Flash experiences light trading, and prices remain relatively stable. For details, please refer to the information below:

DRAM Spot Market:

Due to the year-end holiday period, the spot market has been quiet recently and showed no notable price fluctuations. The spot market is also relatively unaffected by smartphone brands’ restocking activities, so the overall sentiment is fairly conservative. Some spot sellers have begun to raise quotes for DRAM chips since January 2, but the demand quantities are insufficient to push up transaction prices. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) rose by 2.54% from US$1.773 last week to US$1.818 this week.

NAND Flash Spot Market:

Transactions have been rather sluggish from the spot market amidst the holiday period, with no apparent price fluctuations. The spot market is not as affected by the recent stock-up demand for smartphones and SSD, and has been relatively conservative in general sentiment, where the lack of demand is insufficient in pulling up concluded prices even with the aggressive ramp up of wafer quotations among several sellers since the beginning of the year. 512Gb TLC wafer has dropped by 0.29% in spot prices, arriving at US$3.117.