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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)
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Though has yet to disclose the actual progress on its 12-Hi HBM3e verification with AI chip giant NVIDIA, Samsung is rumored to lower its target for the maximum production capacity (CAPA) of HBM by the end of 2025, which echoes the speculation on delays of HBM3e mass production for key customers, according to Korean media outlet ZDNet.
It is worth noting that the struggling memory giant reportedly plans to lower the capacity target by over 10%, from the initial monthly goal of 200,000 units to 170,000 units by the end of next year, ZDNet suggests, as it now takes a relatively cautious approach to facility investment plans.
According to the report, as of the second quarter, in order to narrow the gap with competitors such as SK hynix, Samsung had planned to increase HBM production capacity to 140,000–150,000 units per month by the end of this year, and up to 200,000 units per month by the end of next year.
At the Q2 earnings call in late July, Samsung disclosed an ambitious roadmap for its HBM products. According to a previous report from Business Korea, Samsung expects the share of HBM3e chips within its HBMs to surpass the mid-10 percent range in the third quarter, and speedily grow to 60% by the fourth quarter. The company also projects its HBM sales to increase three to five times in the second half of 2024.
However, the scenario has changed a few months later. Citing a source familiar with the situation, the report by ZDNet notes that Samsung has decided to slow down the pace of facility investments due to the underperformance of its HBM business. Further discussions on investments will only proceed once its HBM3e supply for NVIDIA is confirmed, the source indicates.
According to the analysis by TrendForce, achieving stable yields for HBM3 and HBM3e 8-Hi products required at least two quarters of learning in previous generations. Based on this precedent, the learning curve for HBM3e 12-Hi is unlikely to shorten significantly, especially with the rapid market shift toward the 12-Hi version.
Furthermore, key products such as NVIDIA’s B200 and GB200, as well as AMD’s MI325 and MI350, will adopt HBM3e 12-Hi. The high cost of these systems will also demand strict stability, complicating mass production and adding another layer of uncertainty.
Ahead of its Q3 earnings call, Samsung already warned its profit would fall short of market expectations, while issuing an apology for the disappointing performance. Samsung’s operating profit for the third quarter is expected to reach 9.1 trillion won, which is below the expected 10 trillion won.
Another report by The Korea Times notes that the market expected SK hynix to see a substantial increase in operating profit driven by strong HBM demand, potentially outpacing Samsung’s semiconductor division.
To boost its competitiveness in the semiconductor industry, Samsung intends to assign research and development staff directly to its manufacturing facilities. This initiative seeks to enhance communication and collaboration with on-site production teams, according to a report by SmBom.
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(Photo credit: Samsung)
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South Korea’s two major memory chip manufacturers, Samsung Electronics and SK Hynix, are set to release their Q3 earnings reports (July to September) at the end of the month, with Samsung Electronics also announcing its financial forecast on October 8.
According to The Korea Times, the market expects SK Hynix to see a significant surge in operating profit driven by strong demand for high-bandwidth memory (HBM), potentially outperforming Samsung’s semiconductor division.
The Korea Times reports that SK Hynix’s Q3 operating profit is forecast to hit 6.76 trillion won (around $5 billion), with total revenue projected at 17.99 trillion won. If these estimates hold, SK Hynix may set a new record for quarterly operating profit, despite the broader challenges facing the global memory chip market.
On the other hand, Samsung Electronics does not break down individual business units in its earnings forecasts. However, the company’s Device Solutions (DS) division, which handles the memory chip business, is expected to contribute more than half of Samsung’s overall operating profit.
The market anticipates that Samsung Electronics will report an overall Q3 operating profit of 10.77 trillion won, with its DS division’s profit ranging between 5.2 trillion and 6.3 trillion won.
The Korea Times points out that SK Hynix could potentially surpass Samsung in operating profit by 400 billion to 1.5 trillion won, dealing a blow to Samsung’s long-standing dominance as the world’s top memory chipmaker.
There is growing speculation that SK Hynix may overtake Samsung in annual operating profit.
According to Business Korea, SK Hynix has begun mass production of the world’s first 12-layer HBM3E, following its earlier shipment of 8-layer HBM3E to Nvidia, the leading semiconductor company. The company plans to start supplying the 12-layer HBM3E within this year, further strengthening its market position.
TrendForce forecasts that by next year, HBM will account for 10% of total DRAM bit production and contribute more than 30% of DRAM market revenue. Moreover, HBM3E is expected to make up over 80% of the total HBM demand.
(Photo credit: SK Hynix)
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Is the winter really coming for the memory sector? Despite an earlier report by Morgan Stanley warning of an AI bubble, U.S. memory giant Micron reveals a financial guidance that beats market expectations, projecting its fiscal first-quarter revenue to reach USD 8.7 billion, higher than an average analyst estimate of USD 8.32 billion, Bloomberg notes.
Meanwhile, Micron expects a significant increase in gross margin to around 39.5%, and an adjusted earnings of USD 1.74 per share, exceeding analysts’ estimates of USD 1.65, according to Reuters.
The growth momentum will mainly rely on the soaring demand for HBM, driven by AI. Earlier in June, Micron noted that its HBM chips have been fully booked for 2024 and 2025.
In terms of the outlook for the overall HBM market, Micron’s view evidently contradicts with that of Morgan Stanley, as it eyes the HBM total available market (TAM) to grow from approximately USD 4 billion in 2023 to over USD 25 billion in 2025.
And the company is making strides in its progress in HBM in the following year. According to its press release, Micron expects its HBM, high-capacity D5 and LP5 solutions, and data center SSD products to deliver multiple billions of dollars in revenue in fiscal 2025.
The U.S. memory giant also expects its HBM market share to commensurate with the company’s overall DRAM market share sometime in 2025.
According to TrendForce, Micron ranked third in DRAM revenue in Q2, 2024, with a market share of 19.6%, after Samsung’s 42.9% and SK hynix’s 34.5%, respectively.
Regarding the latest development on HBM, after its 8-hi HBM3E entered mass production in February, Micron confirms that it has started shipments of production-capable HBM3E 12-hi 36GB units to key industry partners to enable qualifications across the AI ecosystem, stating that its HBM3E 12-hi 36GB delivers 20% lower power consumption than its competitors’ HBM3E 8-hi 24GB solutions while providing 50% higher DRAM capacity.
The company expects to ramp its 12-hi HBM3E in early 2025 and increase the 12-hi mix in the overall shipments throughout the year.
According to a previous report by Tom’s Hardware, the new products are reportedly designed for cutting-edge processors used in AI and high-performance computing (HPC) workloads, including NVIDIA’s H200 and B100/B200 GPUs.
Micron delivered a strong finish to fiscal year 2024, with fiscal Q4 revenue at the high end of its guidance range and gross margins and earnings per share (EPS) above the high end of its guidance ranges.
In fiscal Q4, Micron’s revenue jumped 93% YoY to USD 7.75 billion. Its earnings per share (EPS) came in at USD 1.18, a notable turnaround from the loss of USD 1.07 per share in the same period of 2023. In addition, it achieved record-high revenues in NAND and in its storage business unit.
Micron’s fiscal 2024 revenue grew over 60%, with company gross margins expanding by over 30 percentage points and achieved revenue records in data center and in automotive, according to its press release.
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(Photo credit: Micron)
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According to a recent report from BusinessKorea, Morgan Stanley published its “Winter Looms” analysis, following last month’s “Prepare for the Peak,” which warned of an AI bubble. The report continues to take a bearish view on Korean memory chipmakers, citing weak demand for general DRAM and an oversupply of AI-specific high bandwidth memory (HBM).
Morgan Stanley projects that in 2024, global HBM supply will hit 250 billion gigabits (Gb), far exceeding demand, estimated at 150 billion Gb—a surplus of 66.7%. The firm also points to Samsung Electronics’ aggressive expansion into the HBM market as a major factor driving this potential oversupply.
BusinessKorea cited industry insiders who argue that Morgan Stanley’s outlook is excessively pessimistic. They note that the HBM market is driven by customized, client-approved products, making oversupply less likely. Both SK Hynix and Samsung Electronics have publicly stated that HBM supply is fully booked through 2025.
Critics further contend that Morgan Stanley has underestimated the scale of AI investment by major tech firms, which is the main driver of HBM demand. While the report projects that AI investment growth from 10 major tech companies will drop sharply from 52% this year to 8% next year, Bloomberg forecasts a 33.7% rise this year and a 13.4% increase in 2025 across 13 leading tech firms.
Morgan Stanley also predicts that general DRAM will peak in Q4 2024 and begin a multi-year decline through 2026, citing weak demand for semiconductor-reliant IT products. The global PC and smartphone markets have indeed been sluggish, with reports indicating that pre-orders for Apple’s iPhone 16 series were down 13% compared to its predecessor. However, the same report noted that Samsung Electronics and SK Hynix have both stated that demand for memory in smartphones and PCs remains stable.
TrendForce Senior Vice President Avril Wu noted that while DRAM prices have shown signs of weakness over the past two quarters, the overall average selling price is expected to rise by 2025. Wu added that as HBM continues to take up more conventional DRAM production capacity, pricing across different products may vary, but the increasing penetration of HBM should help stabilize the DRAM market, leaving the firm less pessimistic about next year’s outlook.
(Photo credit: Samsung)