With numerous cloud computing companies and large-scale AI model manufacturers investing heavily in AI computing infrastructure, the demand for AI processors is rapidly increasing. As per a report from IJIWEI, the demand for HBM (High Bandwidth Memory), a key component among them, has been on the rise as well.

Amid the opportunity brought about by the surge in demand for computing power, which has in turn created a wave of opportunities for storage capabilities, when looking at the entire HBM industry chain, the number of China’s local companies which are able to enter the field is limited.

Faced with significant technological challenges but vast prospects, whether from the perspective of independent controllability or market competition, it is imperative to accelerate the pace of catching up.

HBM Demand Grows Against the Trend, Dominated by Three Giants

The first TSV HBM product debuted in 2014, but it wasn’t until after the release of ChatGPT in 2023 that the robust demand for AI servers drove rapid iterations of HBM technology in the order of HBM1, HBM2, HBM2e, HBM3, and HBM3e.

The fourth-generation HBM3 has been mass-produced and applied, with significant improvements in bandwidth, stack height, capacity, I/O speed, and more compared to the first generation. Currently, only three storage giants—SK Hynix, Samsung Electronics, and Micron—are capable of mass-producing HBM.

According to a previous TrendForce press release, the three major original HBM manufacturers held market shares as follows in 2023: SK Hynix and Samsung were both around 46-49%, while Micron stood at roughly 4-6%.

In 2023, the primary applications in the market were HBM2, HBM2e, and HBM3, with the penetration rate of HBM3 increasing in the latter half of the year due to the push from NVIDIA’s H100 and AMD’s MI300.

According to TrendForce’s report, SK Hynix led the way with its HBM3e validation in the first quarter, closely followed by Micron, which plans to start distributing its HBM3e products toward the end of the first quarter, in alignment with NVIDIA’s planned H200 deployment by the end of the second quarter.

Samsung, slightly behind in sample submissions, is expected to complete its HBM3e validation by the end of the first quarter, with shipments rolling out in the second quarter.

Driven by market demand, major players such as SK Hynix, Samsung, and Micron Technology are increasing their efforts to expand production capacity. SK Hynix revealed in February that all its HBM products had been fully allocated for the year, prompting preparations for 2025 to maintain market leadership.

Reportedly, Samsung, aiming to compete in the 2024 HBM market, plans to increase the maximum production capacity to 150,000 to 170,000 units per month before the end of the fourth quarter of this year. Previously, Samsung also invested KRW 10.5 billion to acquire Samsung Display’s factory and equipment in Cheonan, South Korea, with the aim of expanding HBM production capacity.

Micron Technology CEO Sanjay Mehrotra recently revealed that Micron’s HBM production capacity for 2024 is expected to be fully allocated.

Although the three major HBM suppliers continue to focus on iterating HBM3e, there is still room for improvement in single-die DRAM and stacking layers. However, the development of HBM4 has been put on the agenda.

Trendforce previously predicted that HBM4 will mark the first use of a 12nm process wafer for its bottommost logic die (base die), to be supplied by foundries. This advancement signifies a collaborative effort between foundries and memory suppliers for each HBM product, reflecting the evolving landscape of high-speed memory technology.

Continuous Surge in HBM Demand and Prices, Local Supply Chains in China Catching Up

In the face of a vast market opportunity, aside from the continuous efforts of the three giants to ramp up research and production, some second and third-tier Chinese DRAM manufacturers have also entered the HBM race. With the improvement in the level of locally produced AI processors, the demand for independent HBM supply chains in China has become increasingly urgent.

Top global manufacturers operate DRAM processes at the 1alpha and 1beta levels, while China’s DRAM processes operate at the 25-17nm level. China’s DRAM processes are approaching those overseas, and there are advanced packaging technology resources and GPU customer resources locally, indicating a strong demand for HBM localization. In the future, local DRAM manufacturers in China are reportedly expected to break through into HBM.

It is worth noting that the research and manufacturing of HBM involve complex processes and technical challenges, including wafer-level packaging, testing technology, design compatibility, and more. CoWoS is currently the mainstream packaging solution for AI processors, and in AI chips utilizing CoWoS technology, HBM integration is also incorporated.

CoWoS and HBM involves processes such as TSV (Through-Silicon Via), bumps, microbumps, and RDL (Redistribution Layer). Among these, TSV accounts for the highest proportion of the 3D packaging cost of HBM, close to 30%.

Currently, China has only a few leading packaging companies such as JCET Group, Tongfu Microelectronics, and SJSemi that possess the technology (such as TSV through-silicon via) and equipment required to support HBM production.

However, despite these efforts, the number of Chinese companies truly involved in the HBM industry chain remains limited, with most focusing on upstream materials.
With GPU acquisition restricted, breakthroughs in China’s AI processors are urgently needed both from its own self-sufficiency perspective and in terms of market competition. Therefore, synchronized breakthroughs in HBM are also crucial from Chinese manufacturers.

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• [News] Another Semiconductor Giant Makes a Move on HBM
• High-End AI Server Demand from North America’s Top Four CSPs Expected to Exceed 60% in 2024, Says TrendForce

(Photo credit: SK Hynix)

With the effective reduction of production by suppliers, the price of memory is rebounding, and the semiconductor memory market finally shows signs of recovery. From the perspective of market dynamics and demand changes, NAND Flash, as one of the two major memory products, is experiencing a new round of changes.

Suppliers are in Constant Motion: Increasing Prices and Adjusting Production Capacity Utilization

Since 3Q23, NAND Flash chip prices have been on the rise for several consecutive months. TrendForce believes that, under the precondition of a conservative market demand prospect for 2024, chip price trends will depend on suppliers’ production capacity utilization.

There have been frequent developments in the NAND flash memory industry chain, with some manufacturers indicating a willingness to raise prices or increase production capacity utilization.

Wallace C. Kou, General Manager of NAND Flash Supplier SIMO, stated that prices for the second quarter of NAND Flash have already been settled down, which will increase by 20%; some suppliers have started to make profits in the first quarter, and most suppliers will earn money after the second quarter.

Pua Khein Seng, CEO of PHISON, believes that further price increases for SSD solid-state drives may significantly reduce market demand. If prices are too high, demand may begin to waver again. He suggested that NAND manufacturers stop reducing production and start meeting demand, rather than allowing low supply and high demand to push up prices.

From the perspective of the industry chain, Samsung’s Xi’an fab has significantly increased its operating rate, and Kioxia is considering adjusting its production reduction plan.

As for Samsung, Samsung Electronics’ NAND Flash fab in Xi’an, China, has restored its operating rate to around 70%, according to a report from the global media “THE ELEC”. In 2H23, Samsung lowered the operating rate of the fab to 20-30%. This is the lowest point for the fab since the decline in memory prices and demand began in late 2022.

The Xi’an fab is Samsung Electronics’ only memory semiconductor production base located outside of Korea, with a monthly production capacity of 200,000 300mm wafers, accounting for 40% of Samsung’s overall NAND output.

Samsung Electronics plans to upgrade its Xi’an NAND Flash fab to the 236-layer NAND process and kick-off large-scale expansion. It is understood that the company will gradually introduce equipment capable of producing 236-layer NAND at the Xi’an fab in 2024.

As to Kioxia, the company recently stated that it will re-evaluate the production reduction plan for memory medium flash, used in electronic devices, implemented since 2022 and ramp up production. Kioxia expects that by March of this year, the utilization rate of its NAND fab will return to around 90%, relying on demand.

However, TrendForce pointed out that the previously predicted quarter-on-quarter increase in contract prices for NAND Flash in 1Q24 is about 20-25%. Although the overall demand outlook for the second quarter is still conservative, NAND Flash suppliers have adjusted their production capacity utilization since late in 4Q23 and early 1Q24.

In addition, NAND Flash buyers have already begun to gradually replenish their inventories in the first quarter. Therefore, the quarter-on-quarter increase in contract prices for NAND Flash in the second quarter will converge to 10-15%.

Market Landscape: Samsung Still Dominates, Two Major Manufacturers May Merge

Currently, the NAND Flash market is still dominated by the five major manufacturers, with Samsung and SK Hynix accounting for the lion’s share.

As per a research from TrendForce on March 6, in 4Q23, Samsung still firmly held the top position in the NAND Flash market, with its market share increasing from 31.4% in the previous quarter to 36.6%; next was SK Group, with its market share increasing from 20.2% in the previous quarter to 21.6%.

Following them were Western Digital, whose market share decreased from 16.9% in the previous quarter to 14.5%, Kioxia, whose market share decreased from 14.5% in the previous quarter to 12.6%, and Micron, whose market share decreased from 12.5% in the previous quarter to 9.9%.

It is worth noting that Western Digital’s plan to merge with Kioxia, which has been in progress since 2021, has not yet been concluded. According to sources cited by a report from Japanese media 47news, the merger negotiations were opposed by a competitor, leading to their termination. Earlier reports from Japanese media Asahi News indicated that both parties might resume merger negotiations at the end of April.

Reportedly, Bain Capital is in talks with relevant companies to restart merger negotiations between Western Digital and Kioxia. If the merger is successful, the newly formed company will control one-third of the global NAND Flash market.

If the merger is successful, the new company founded by Western Digital and Kioxia will have a market share of over 30%, leading to a variation in the market landscape of the NAND Flash market.

Recently, Western Digital has taken action again. On March 5, the company announced that after splitting its NAND Flash business, it will retain its original name and focus on its core HDD business. It also stated that the split transaction is expected to be completed in 2H24.

In light of the announcement, Irving Tan, the current Executive Vice President of Global Operations at Western Digital, will serve as the CEO of the remaining independent HDD company, continuing to run under the Western Digital brand. The current CEO, David Goeckeler, will be transferred to the newly established company in the NAND Flash department and serve as the CEO of the new company.

The news of Western Digital’s divestiture of its NAND Flash business, which has long been plagued by oversupply, has sparked widespread discussion in the industry. However, the company believes that this move will accelerate innovation and bring new growth opportunities. At the same time, due to the independent capital structure, the operating efficiency of the two entities will be higher compared to a unified company.

Outlook: Q1 NAND Flash Industry Revenue May Increase by 20% QoQ

In terms of industry revenue, according to the latest research from TrendForce, NAND Flash industry revenue reached USD 11.49 billion in 4Q23, an increase of 24.5% from the previous quarter.

This was mainly benefited from the recovery of terminal demand due to year-end promotions, and the expansion of orders in the component market by reason of price hikes, as well as the vigorous shipment of bits compared to the same period last year. Meanwhile, companies continued to release views that demand in 2024 will perform better than in 2023, and strategic stocking has been initiated.

Looking ahead to 1Q24, TrendForce believes that with the significant improvement in supply chain inventory levels and prices still on the increase, customers continue to increase purchase orders to avoid the risk of supply shortages and rising costs.

Thereby, despite being the traditional off-season, TrendForce predicts that the industry revenue of NAND Flash in the first quarter will still increase by 20% QoQ due to the continuous expansion of order scale, which stimulates NAND Flash contract prices to increase by an average of 25%.

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• [News] NAND Flash Manufacturers Kioxia and WD Reportedly Set to Resume Merger Talks in Late April
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(Photo credit: Kioxia)

There are market rumors suggesting that Samsung Electronics plans to switch to the chip manufacturing technology used by SK Hynix in an effort to catch up with competitors in the increasingly heated competition of high-bandwidth memory (HBM).

As per Reuters’ report on March 13th, demand for HBM has surged due to the popularity of Generative AI. However, while SK Hynix and Micron Technology have successively finalized supply agreements with NVIDIA Corp., Samsung unexpectedly missed out. It is reported that Samsung’s HBM3 has yet to pass NVIDIA’s quality tests.

Reuters report further cited sources indicating that one of the reasons for Samsung’s lagging progress is its insistence on using Non-Conductive Film (NCF) technology, which has led to some production issues. In contrast, SK Hynix has taken the lead by switching to mass reflow molded underfill (MR-MUF) technology, addressing the weaknesses of NCF and becoming the first supplier of HBM3 chips to NVIDIA.

The report states that Samsung is in talks with several material suppliers, including Nagase Corporation from Japan, in hopes of purchasing MUF materials. It is revealed that Samsung intends to utilize both NCF and MUF technologies in its latest HBM chips.

Regarding the matter, both of NVIDIA and Nagase declined to comment.

As for the current landscape of the HBM market, starting in 2024, the market’s attention will shift from HBM3 to HBM3e, with expectations for a gradual ramp-up in production through the second half of the year, positioning HBM3e as the new mainstream in the HBM market.

According to TrendForce’s latest report, SK hynix led the way with its HBM3e validation in the first quarter, closely followed by Micron, which plans to start distributing its HBM3e products toward the end of the first quarter, in alignment with NVIDIA’s planned H200 deployment by the end of the second quarter.

Samsung, slightly behind in sample submissions, is expected to complete its HBM3e validation by the end of the first quarter, with shipments rolling out in the second quarter. With Samsung having already made significant strides in HBM3 and its HBM3e validation expected to be completed soon, the company is poised to significantly narrow the market share gap with SK hynix by the end of the year, reshaping the competitive dynamics in the HBM market.

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• [News] Another Semiconductor Giant Makes a Move on HBM
• HBM3 Initially Exclusively Supplied by SK Hynix, Samsung Rallies Fast After AMD Validation, Says TrendForce

(Photo credit: SK Hynix)

Amidst the AI frenzy, HBM has become a focal point for major semiconductor manufacturers, and another storage giant is making new moves.

According to Korean media “THE ELEC”, Samsung Electronics plans to establish an HBM development office to enhance its competitiveness in the HBM market. The size of the team has not been determined yet, but Samsung’s HBM task force is expected to undergo upgrades.

The report indicates that if the task force is upgraded to a development office, Samsung will then establish specialized design and solution teams for HBM development. The head of the development office will be appointed from among vice president-level personnel.

In terms of research and development progress, the three major manufacturers have all advanced to the stage of HBM3e.

Regarding Samsung, in February, the company just released its first 36GB HBM3e 12H DRAM, which is currently Samsung’s largest capacity HBM product. Presently, Samsung has begun providing samples of HBM3e 12H to customers, with mass production expected to commence in the latter half of this year.

On the other hand, Micron Technology has announced the commencement of mass production of high-frequency memory “HBM3e,” which will be utilized in NVIDIA’s latest AI chip, the “H200” Tensor Core graphics processing unit (GPU). The H200 is scheduled for shipment in the second quarter of 2024.

Another major player, SK Hynix, as per Business Korea, plans to begin mass production of HBM3e in the first half of 2024.

In terms of production capacity, both SK Hynix and Micron Technology have previously disclosed that HBM production capacity is fully allocated. This indicates a strong market demand for HBM, reaffirming manufacturers’ determination to expand production.

As per previous report by Bloomberg, SK Hynix plans to invest an additional USD 1 billion in advanced packaging for HBM. The company stated in its recent financial report that it intends to increase capital expenditures in 2024 and shift production focus to high-end storage products such as HBM.

The capacity for HBM is expected to more than double compared to last year. From a demand perspective, it is anticipated that over 60% of future demand for HBM will stem from the primary application of AI servers.

Read more

• [News] SK Hynix Reportedly Invests USD 1 Billion in Advanced Packaging to Strengthen HBM Chip Leadership
• High-End AI Server Demand from North America’s Top Four CSPs Expected to Exceed 60% in 2024, Says TrendForce

(Photo credit: Samsung)

Taiwan’s residential and industrial electricity prices have long ranked among the lowest globally, but, as per CNA’s report, to stabilize Taiwan Power Company’s finances, electricity price hikes in April are nearly finalized. Among these adjustments, industrial electricity rates will vary based on the specific industry’s consumption patterns.

Under the current plan, residential and general industrial electricity will be categorized into three tiers, each subject to different price adjustments. As for the “super consumers” in the high-voltage category (defined as those with over 5 billion kilowatt-hours consumed annually for two consecutive years), the rate hike could reach up to 30 percent, impacting major consumers in the semiconductor firms like TSMC and Micron.

As per the report from Taiwanese media NowNews, market concerns are mounting over the 24-hour operations of semiconductor fabs. Despite the potential for energy savings through “time-based electricity pricing,” the effectiveness of such measures may be limited. This could significantly escalate operating costs for companies.

Regarding the potential impact of electricity price adjustments on the semiconductor industry, Taiwanese Minister of Economic Affairs Mei-Hua Wang recently stated that even with 24-hour electricity usage, TSMC maintains high energy efficiency. Moreover, semiconductor fabs primarily export their products after manufacturing. Compared to fabs in other countries, Taiwan’s electricity prices are still relatively low.

The definition of high-voltage super consumers entails annual electricity usage exceeding 5 billion kilowatt-hours, with consecutive growth over two years. Different companies will be distinguished within this category. Semiconductor manufacturers, as well as data centers, will be included in the high-voltage super consumer classification.

However, the rate hike of electricity prices for these significant consumers will depend on the subsidy budget allocated by the Executive Yuan. If a subsidy of TWD 100 billion (roughly USD 3.2 billion)  is allocated, the rate hike could exceed 30%. Even with a subsidy of TWD 150 billion (roughly USD 4.8 billion) , the increase would still surpass 20%.

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• [News] TSMC to Expand Production with New Facilities Across Taiwan in April

(Photo credit: TSMC)