According to a report by ZDNET Korea, SK Hynix has scaled back its less profitable CMOS image sensor (CIS) and foundry businesses while reinforcing a strategy that focuses on high-margin high-bandwidth memory (HBM) and AI memory.

Citing industry sources, ZDNET Korea noted that SK Hynix has reduced its R&D investment in CIS and cut production capacity by more than half compared to last year, with estimated monthly output of 12-inch wafers dropping to fewer than 7,000 units. Additionally, staff from the system-on-chip (SoC) design department, previously responsible for designing memory controllers, are being reassigned to the HBM division.

The report also mentions that SK Hynix has increased its SoC design workforce this year, directing them toward projects aimed at developing next-generation memory solutions with computational capabilities.

SK Hynix’s strategy is to downsize certain business areas and concentrate resources on the more profitable HBM. The company is also focusing on future growth areas such as Compute Express Link (CXL), processing-in-memory (PIM), and AI solid-state drives (AI SSD).

The report quotes a semiconductor industry expert stating that it takes only three months to achieve return on investment (ROI) after establishing an HBM production line. For companies, investing heavily in HBM, which has high demand and profitability, is a logical decision.

TrendForce has noted that HBM’s average selling price is several times higher than that of conventional DRAM, with a price gap around five times greater than DDR5. While contract prices for general DRAM and NAND are expected to fall in the fourth quarter, HBM prices are projected to rise by 8% to 13%.

In fact, the news of reduced CIS R&D and production capacity is not new. Earlier this year, media outlets reported that due to decreasing demand, SK Hynix planned to reduce its CIS production and shift focus to its HBM business.

Additionally, SK Hynix has downsized its foundry business. According to a May report by the Korea Economic Daily, the board of directors of SK Hynix’s foundry subsidiary, SK Hynix System IC (Wuxi) decided to sell a 21.3% stake in its Wuxi plant to the Wuxi Industrial Development Group for an estimated $349.3 million.

(Photo credit: SK Hynix)

The global semiconductor market is nearing the end of its inventory cycle. With the rise of AI-related applications, new energy vehicles, 5G, high-performance computing, and other emerging sectors, industry experts estimate that the global semiconductor industry could reach a valuation of $1 trillion by around 2030.

Recently, new signals have emerged from various regions globally, including China, South Korea, and Japan. Based on the changing data, the growth in different sectors reflects shifts in supply and demand, indicating a widespread recovery trend in the semiconductor industry.

South Korea: Memory Chip Exports Surge by 60.7% YoY

On October 14, local time, data from South Korea’s Ministry of Science and ICT showed that boosted by record semiconductor sales, South Korea’s ICT (Information and Communication Technology) exports in September 2024 increased by 24% year-on-year to 22.36 billion USD(about 160 billion RMB), marking the 11th consecutive month of growth and the second-highest monthly figure on record.

In the semiconductor sector, South Korea’s semiconductor exports amounted to 13.63 billion USD (about 96.5 billion RMB) in September 2024, a historical high, with a 36.3% year-on-year increase.

Notably, memory chip exports surged 60.7% year-on-year to 8.72 billion USD, a nearly 20% increase compared to the previous month. System semiconductor exports rose 5.2% year-on-year to 4.37 billion USD. The Ministry highlighted that the demand for high-bandwidth memory (HBM) and other high-value-added products has fueled significant growth in memory semiconductor exports.

South Korea is home to two of the world’s largest memory manufacturers: Samsung Electronics and SK Hynix. According to TrendForce, Samsung and SK Hynix occupy the top two spots globally in the DRAM and NAND Flash markets, followed by Micron. Hence, South Korea’s semiconductor sector remains a focal point for the industry.

Additionally, the memory market has experienced significant fluctuations this year, with concerns about future trends.

TrendForce data indicated that before the third quarter of 2024, demand for consumer products remained weak, with AI servers driving the primary demand for memory. However, as HBM gains more market share, it is crowding out the capacity for existing DRAM products, leading suppliers to maintain certain pricing levels for contracts. Although server OEMs have maintained momentum in placing orders, smartphone brands are still cautious.

TrendForce forecasts that the growth rate of memory prices will significantly slow in the fourth quarter. Conventional DRAM prices are expected to increase by 0% to 5%, but with HBM accounting for a larger proportion of sales, the overall DRAM price is estimated to rise by 8% to 13%, marking a noticeable slowdown compared to the previous quarter.

China: Integrated Circuit Exports Grow by 22%

According to recent statistics from Chinese customs, China’s total imports and exports reached 32.33 trillion RMB in the first three quarters of 2024, up by 5.3% year-on-year. Of this, exports grew by 6.2% to 18.62 trillion RMB, and imports increased by 4.1% to 13.71 trillion RMB.

In terms of exports, China’s exports of mechanical and electrical products reached 11.03 trillion RMB in the first three quarters, an increase of 8%, accounting for 59.3% of total exports. Notably, high-end equipment exports grew by 43.4%, while exports of integrated circuits, automobiles, and household appliances rose by 22%, 22.5%, and 15.5%, respectively.

In terms of imports, China’s integrated circuit and auto parts imports grew by 13.5% and 4.6%, respectively, in the first three quarters. Consumer goods imports exceeded 1.3 trillion RMB.

Regionally, China’s trade with over 160 countries and regions has grown, indicating steady diversification. Trade with Belt and Road Initiative countries reached 15.21 trillion RMB, growing by 6.3% and accounting for 47.1% of China’s total trade. Trade with RCEP members grew by 4.5%, with ASEAN trade increasing by 9.4%. Meanwhile, trade with the EU and the U.S. grew by 0.9% and 4.2%, respectively.

Japan: Semiconductor Equipment Exports to China Surge by 61.6%

Data released by Japan’s Ministry of Finance shows that in August 2024, Japan’s semiconductor equipment exports to China surged by 61.6%, reaching 179.9 billion yen (around $1.29 billion).

The total weight of equipment exported from Japan to China in August was 6,742 tons, a 41% increase compared to the previous month. Machinery accounted for 23.2% of Japan’s total exports to China, with semiconductor equipment making up 11.9%.

These figures underscore Japan’s critical role in the global semiconductor supply chain.

Additionally, ASML, the Dutch photolithography giant, previously reported that its exports to China grew by 21% quarter-on-quarter in Q2 2024, reaching 2.3 billion euros. Earlier data showed that Asia accounted for 84% of ASML’s 2023 revenue.

(Photo credit: istock)

At its previous earnings call in July, Samsung has announced the ambitious goal that its HBM sales would increase three to five times in 2H24. However, as it is still struggling to pass the verification of 12-Hi HBM3e products, the company’s prospects for returning to glory in the near term seems to be rather dim.

According to a report by Korean media outlet ZDNet, the main issue may lie in the core die of HBM, while the adoption of 1a DRAM is hindering Samsung’s recent efforts to supply HBM3e for NVIDIA.

Notably, an insider cited by the report notes that Samsung’s Vice Chairman Jun Young-hyun, the new Head of Device Solutions (DS) Division, is aware of these issues, so the decision for whether to redesign the 1a DRAM or not may be made soon.

According to the report, Samsung began the mass production of 1a (4th generation) DRAM, which has a linewidth of approximately 14 nm, as early as in the second half of 2021. It is worth noting that the company tries to enhance the product’s competitiveness by actively adopting advanced technologies such as EUV (extreme ultraviolet lithography).

ZDNet notes that Samsung applied five EUV layers to its 1a DRAM, which is significantly more than the one layer used by its major competitor, SK hynix.

However, though EUV is advantageous for reducing linewidths compared to the existing ArF (argon fluoride) lithography process, which is supposed to enhance efficiency and thus lowering manufacturing costs, EUV’s high technical difficulty has negatively affected the stability of the process, according to the report.

As a result, the cost of Samsung’s 1a DRAM has not decreased as initially anticipated, according to the report, with the yield issue occurring reportedly hinders Samsung’s HBM3e verification progress with NVIDIA.

Previous reports indicate that Samsung had conducted an on-site inspection with NVIDIA regarding the 8-layer HBM3e products at its Pyeongtaek campus. While the inspection itself concluded without any issues, concerns have reportedly been raised as the data processing speed (Gbps) of Samsung’s 8-layer HBM3e is about 10% lower compared to its rivals, according to sources cited by ZDNet.

Both SK hynix and Micron utilize 1b DRAM for their HBM3e core dies, the report notes.

Therefore, industry insiders cited by ZDNet reveal that Samsung has been internally discussing the possibility of redesigning some of the circuits in its 1a DRAM.

However, If Samsung does proceed with the redesign, it is expected to take at least six months for the product to be completed, the report suggests, which means the mass production could only begin by the second quarter of next year, and it will be challenging to supply the product in a timely manner.

Read more

• [News] Lagging behind SK hynix in HBM, Samsung Plans Significant Year-end Cuts to Chip Executives
• [News] Samsung Rumored to Cut HBM Production Target by 10% by End of 2025 amid HBM3e Delays

(Photo credit: Samsung)

Any suggestions for Samsung to get out of the rut? The remedy for its slow transformation may be hidden in the experience of Japanese peers. According to reports by Nikkei and Korea media outlet edaily, Samsung has begun researching Japanese companies, led by its Future Business Planning Division.

Citing Nikkei’s report on October 16^th, edaily notes that Samsung’s Future Business Planning Division, which is directly under the charge of Chairman Jay Y. Lee himself, plans to analyze the operations of 110 Japanese companies to study the decline and revival of the Japanese electronics industry. The main objective of the initiative is to identify and nurture business opportunities for Samsung, the reports suggest.

Notably, the research is said to include major tech firms such as Sony Group, which has gradually shifted its focus from hardware to content-oriented businesses like gaming, music, and film, edaily notes. Hitachi, a paradigm of downsizing its original business empire to focus on key growth areas instead, is rumored to be another research subject.

The reports indicate that Samsung’s Future Business Planning Division is gathering not only top employees from various divisions of the group but also individuals with business experience from outside, as it tries to “seek answers from the past for the future.”

Interestingly though, Samsung seems to be in the same shoes as its Japanese rivals a few years ago. Nikkei states that the South Korean tech giant surpassed Japanese companies in the semiconductor and television sectors, but now has found itself in a defensive position when being gradually caught up by Chinese companies, much like the situation Japanese firms used to get stuck in.

Samsung reported its third-quarter earnings last week. The company’s operating profit was initially expected to exceed 10 trillion won, but the actual performance fell short of that target. In terms of chip making business, it is lagging behind foundry giant TSMC due to unstable 3nm yield rates. Regarding memory business, SK hynix is claiming the throne of HBM amid AI boom.

Read more

• [News] Lagging behind SK hynix in HBM, Samsung Plans Significant Year-end Cuts to Chip Executives
• [News] Samsung Foundry Faces Yield Struggles and Client Losses, External Push for Spinoff and U.S. Listing

(Photo credit: Samsung)

The AI wave continues to fuel surging demand for AI chips. Following reports of HBM sellouts and manufacturers ramping up production to meet demand, recent news reveals that Nvidia’s Blackwell architecture GPUs are also in short supply.

Nvidia’s Blackwell GPUs Sold Out for the Next 12 Months

Although Nvidia’s Blackwell architecture GPUs are delayed until Q4 of this year, it hasn’t dampened orders.

According to Tom’s Hardware, Morgan Stanley recently held a three-day meeting in New York with Nvidia CEO Jensen Huang, CFO Colette Kress, and other members of the chipmaker’s management team.

Morgan Stanley reported that Nvidia stated that orders for Blackwell architecture GPUs are sold out for the next 12 months, and new customers placing orders now won’t receive products until the end of 2025.

Existing customers, including AWS, CoreWeave, Google, Meta, Microsoft, and Oracle, have already purchased all of the Blackwell architecture GPUs that Nvidia and its partner TSMC can produce in the coming quarters.

The industry points out that the demand for high-performance GPUs and the AI chip market behind them remains frenetic, and the competition between major AI chip manufacturers such as Nvidia, AMD, and Intel will become increasingly fierce.

Three Memory Giants Seize HBM3e Opportunities, Highlighting the Importance of 12hi Products

Driven by the continuous iteration of high-performance AI chips and the expansion of HBM capacity per system, the demand for HBM bits continues to grow.

At the same time, with the iteration of mainstream GPU products from Nvidia and AMD, as well as changes in HBM specifications, the market will gradually upgrade from HBM3 to HBM3e. The three major memory manufacturers will actively seize HBM3e opportunities.

According to TrendForce, the annual growth rate of HBM demand bits will be close to 200% in 2024 and will double again in 2025.

TrendForce estimates that driven by the active adoption of new-generation HBM products by AI platforms, more than 80% of HBM demand bits will be for HBM3e generation products in 2025, of which 12-hi will account for more than half, becoming the mainstream product that major AI manufacturers will compete for in the second half of next year, followed by 8-hi.

Samsung, SK Hynix, and Micron have submitted their first batches of HBM3e 12-hi samples in the first half of 2024 and the third quarter, respectively, and are currently in the continuous verification stage. Among them, SK Hynix and Micron are progressing faster and are expected to complete verification by the end of this year.

(Photo credit:  Nvidia)