As South Korean memory giants Samsung and SK hynix announced their third quarter financial reports, posting a 112% and 94% year-over-year revenue growth, respectively, the threat from increasing output of Chinese rivals such as CXMT, which drives prices down, has reportedly prompted them to significantly cut back on legacy memory chip production, according to the report by the Korea Economic Daily.

According to the report, China’s ChangXin Memory Technologies (CXMT) has been ramping up the production of older chips like DDR4 and LPDDR4X, resulting in severe price pressure in legacy products.

CXMT has expanded its monthly DRAM production capacity from 40,000 wafer sheets in 2020 to 160,000 sheets. This capacity is expected to reach 200,000 sheets by year-end and 300,000 by the close of 2025, the report said.

SK hynix to Reduce DDR4 Production to 20% of Total DRAM Output

Industry sources cited by the report noted that in a recent investor relations session with Goldman Sachs, SK hynix suggested that it plans to reduce DDR4 DRAM production to 20% of its total DRAM output by the end of the year, down from 30% in September and 40% in June.

On the other hand, according to the report, in an earnings call with analysts on last week, Kim Jae-joon, executive vice president of Samsung’s device solutions (DS) division, confirmed plans to reduce production of legacy DRAM and NAND flash chips, aligning with industry expectations that chipmakers are scaling back on conventional memory output.

HBM and eSSD Emerge as the New Focus

Instead, both memory giants highlighted in their earnings call that they would shift their focus to highly profitable premium products like HBM and enterprise solid-drivers (eSSDs).

These adjustments by Samsung and SK hynix align with strong server DRAM demand driven by major tech firms like Google and China’s Baidu investing in server infrastructure, while PC DRAM sales have remained stagnant, according to the Korea Economic Daily.

According to SK hynix, as generative AI is developing into a multi-modal1 form and global big tech companies continue to invest to develop artificial general intelligence (AGI), the demand of memory for AI servers such as HBM and eSSD has grown noticeably this year. SK hynix predicts that this trend will continue next year.

According to the Korea Economic Daily, anticipating a prolonged global over supply, SK is accelerating the upgrade of its older DRAM lines in Wuxi, China, to advanced lines for producing fourth-generation 10-nanometer 1a DRAM.

While maintaining steady NAND flash production, in the meantime, SK is increasing the operation rate at its eSSD facility in Dalian, China, to nearly full capacity, according to sources cited by the report.

On the other hand, Samsung noted that in 2025, the company plans to expand the sales of HBM3E and the portion of high-end products such as DDR5 modules with 128GB density or higher for servers and LPDDR5X for mobile, PC, servers, and so on.

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(Photo credit: SK hynix)

According to TrendForce’s latest memory spot price trend report, regarding DRAM spot prices, though the top three DRAM suppliers have not lowered their official prices, spot prices could weaken further because buyers are more passive than before. On the other hand, the ample supply of reball DDR4 chips have also depressed the momentum for DDR4’s price hike. As for NAND flash, spot traders are depleting in anticipation on a revitalization of demand for 3Q24 having perceived the sluggishness from the contract market. Details are as follows:

DRAM Spot Price:

Continuing from last week, there has been no noticeable demand rebound in the spot market. Although the top three DRAM suppliers have not lowered their official prices, spot prices could weaken further because spot buyers are more passive than before, and the demand situation for consumer electronics has yet to experience a turnaround. It is worth noting that spot prices of DDR4 products have been rising by a smaller margin compared with spot prices of DDR5 products since the start of this year. Consequently, some module houses are showing willingness to restock DDR4 products. However, there is still ample supply of reball DDR4 chips, so spot prices of DDR4 products reveal no indication of hikes. The average spot price of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s) dropped by 0.35% from US$1.985 last week to US$1.978 this week.

NAND Flash Spot Price:

Spot traders are depleting in anticipation on a revitalization of demand for 3Q24 having perceived the sluggishness from the contract market. Wafer prices have dropped compared to last week, which reflect how traders are hoping to minimize their losses from inventory by attempting to finalize transactions as soon as possible amidst pessimism. Spot prices of 512Gb TLC wafers have dropped by 1.15% this week, arriving at US$3.234.

According to TrendForce’s latest memory spot price trend report, neither did the DRAM nor NAND spot prices sees much momentum. DDR5 products are relatively stable, while the spot prices of DDR4 products continue to fall gradually due to high inventory levels. As for NAND flash, the spot market saw no apparent changes from last week at a restricted level of transactions also due to sufficient inventory. Details are as follows:

DRAM Spot Price:

The market has not shown notable changes in terms of momentum, and spot prices of DDR5 products are relatively stable. As for DDR4 products, spot prices continue to fall gradually due to high inventory levels. Overall, spot trading is quite limited in terms of volume due to the constraint imposed by weak consumer demand. The average spot price of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s) dropped by 0.10% from US$1.991 last week to US$1.989 this week.

NAND Flash Spot Price:

The spot market saw no apparent changes from last week at a restricted level of transactions also due to sufficient inventory. Spot prices of 512Gb TLC wafers have risen by 1.17% this week, arriving at US$3.291.

Global HBM leader, South Korea’s SK hynix, announced its financial report for the last quarter on July 25, exceeding market expectations. According to a report from Economic Daily News, the company also announced a full-scale effort to boost production of high-bandwidth memory (HBM) for AI, with this year’s capital expenditure expected to surpass initial projections. Additionally, more capacity will be allocated for HBM production.

Industry sources cited by the report also indicate that for Taiwanese manufacturers, the major global memory companies are expanding their HBM production capacity by converting existing DRAM capacity to HBM. This shift will suppress the supply of DDR4 and DDR5 DRAM, positively impacting market conditions.

Previously, as per sources cited by the Economic Daily News, it’s indicated that global memory leader Samsung plans to allocate about 30% of its existing DRAM capacity to HBM production. Now, with SK hynix reportedly making similar plans, this may benefit Taiwanese DRAM-related companies like Nanya Technology and ADATA in the future.

Reportedly, Nanya Technology is said to believe that the DRAM market has significantly improved due to the production cuts by the three major memory manufacturers—Samsung, SK hynix, and Micron—in the second half of last year, combined with the strong demand for HBM driven by generative AI. This chain reaction is spreading to various types of DRAM, and the company expects to see clear operational improvements soon.

SK hynix announced yesterday that its Q2 revenue increased by 125% year-on-year to KRW 16.4 trillion (USD 11.9 billion), setting a new record. Operating profit reached KRW 5.47 trillion, the highest since Q3 2018, significantly better than the KRW 2.9 trillion loss in the same period last year. The operating margin was 33%, exceeding expectations, mainly due to a more than 250% surge in HBM sales and an overall increase in DRAM and NAND chip prices.

SK hynix plans to begin mass production of the next-generation 12-layer HBM3e chips this quarter, enhancing its competitive edge over rivals Samsung and Micron in the design and supply of advanced memory for NVIDIA’s AI accelerators. HBM3e is expected to account for about half of all HBM chip sales this year. Additionally, capital expenditure for this year is likely to exceed initial expectations.

SK hynix predicts that the overall memory market will continue to grow in the second half of the year, with DRAM and NAND chip supply becoming tighter and demand for AI servers remaining strong.

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(Photo credit: SK hynix)

According to a report from South Korean media Maeil Business Newspaper, Samsung Electronics plans to raise prices for server DRAM and enterprise NAND flash by 15% to 20% in the third quarter due to surging demand for artificial intelligence (AI). This move is expected to improve the company’s performance in the second half of the year, while boosting momentum for some Taiwanese companies like Nanya Technology, ADATA, TeamGroup and Transcend in the coming quarters.

Industry sources cited by a report from Economic Daily News believe that with manufacturers defending prices, there is strong support for the market. Additionally, as the three major manufacturers focus on developing high-bandwidth memory (HBM), which limits the output of DDR4 and DDR3, it helps maintain a healthy state for the DRAM industry.

Per Maeil Business Newspaper, sources have revealed on June 26th that Samsung Electronics has recently notified major customers about the planned price increase. The Device Solutions (DS) division, responsible for Samsung’s semiconductor business, held a global strategy meeting at its Hwaseong plant in Gyeonggi-do on the same day, where this matter was discussed.

The report further stated that Samsung Electronics had already increased the prices of NAND flash supplied to enterprises by at least 20% in the second quarter, anticipating that the AI boom will drive higher server demand in the second half of the year.

According to data from DRAMeXchange, the global sales of enterprise NAND flash reached $3.758 billion in the first quarter of this year, marking a 62.9% increase from the previous quarter. With the rising demand, some products are experiencing shortages.

TrendForce also notes that with a slight improvement in server demand, Samsung has indicated it will adopt a more aggressive pricing strategy for server DRAM and enterprise SSDs for 3Q24 deals. TrendForce’s price projections posit that server DRAM prices are expected to increase by more than 10% QoQ, with enterprise SSDs enjoying a similar price range. However, due to sluggish smartphone demand, price increases in mobile categories are expected to be more modest.

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(Photo credit: Samsung)