Samsung Electronics' semiconductor division (DS) expects to achieve record-high performance this year, but the company is concerned that after a period of super-high growth driven by a shortage of memory semiconductors for one to two years, it may fall into a slump again.
The surge in investment in artificial intelligence infrastructure has increased uncertainty in demand forecasting, leading to growing concerns about expanding production facilities. This is because past precedents show that miscalculations in demand forecasting have resulted in overinvestment and ultimately, huge losses.
Samsung Electronics DS Business Division
Industry insiders revealed on the 13th that Samsung Electronics' DS business management and business support team are considering the possibility that the global memory semiconductor market may reverse course starting in 2028. Maximizing profits amidst the AI boom while simultaneously improving business efficiency to mitigate the risks of overinvestment has become a crucial task.
This means that while making large-scale investments in next-generation high-bandwidth memory (HBM) product lines and advanced process technology transformation, there is an urgent need to develop contingency plans to address unpredictable demand slowdowns.
Analysis also indicates that following the AI boom, memory demand has become volatile, and supply cycles have shortened, making it difficult to accurately determine production scale and required investment.
Expanding DRAM and HBM supply
This year, there is consensus on the necessity of expanding DRAM and HBM supply. Demand for HBM from major technology companies including NVIDIA, AMD, and Broadcom is expected to continue into next year, while more than half of the total DRAM sales of Samsung Electronics and SK Hynix, the two leading companies in the DRAM market, come from HBM. As these two companies continue to increase HBM supply, DRAM supply for smartphones, PCs, and servers is facing a shortage.
Samsung Electronics is advancing its transition to next-generation DRAM technology and expanding new production lines at its Hwaseong plant. Industry insiders expect Samsung to continue its transition to 10nm fifth-generation (1b) DRAM technology this year, while securing 10nm sixth-generation (1c) DRAM capacity through new production line expansion centered at its Pyeongtaek plant.
Despite limited space, SK Hynix continues its aggressive investment plans. The company is expanding its memory capacity, centered around major production centers in Icheon, Cheongju, and Yongin. Of particular note is the construction of a next-generation DRAM production line at its new M15X plant.
The government-led Yongin Semiconductor Industrial Cluster development project is expected to be a turning point for both companies in expanding their production capacity. The Yongin Industrial Cluster aims to become the core production center of South Korea's semiconductor industry, with infrastructure and factory construction progressing in phases. Industry insiders believe that after the completion of the first phase of investment in the Yongin Industrial Cluster, more factory construction and large-scale production will commence, and by 2028, through the second phase of investment, production capacity is expected to expand further.
Crucially, Micron Technology in the US is expanding its DRAM production lines, while Kioxia in Japan and Yangtze Memory Technologies in China are pushing forward with the expansion of their NAND flash memory production lines. Micron Technology is expanding its DRAM production lines in Taiwan, Singapore, and the US, and has been placing large-scale equipment orders since last year to increase its HBM supply. Considering that production line construction typically takes about two years, it is expected that from 2028 onwards, the production capacity of all memory manufacturers, including Samsung Electronics, SK Hynix, and Micron Technology, will reach a new level.
Regarding NAND flash memory, if the current growth rate continues, its oversupply is expected to occur faster than that of DRAM. The DRAM market is dominated by three major players: Samsung Electronics, SK Hynix, and Micron. Meanwhile, the NAND flash memory market has seen a surge of new participants, including Kioxia and Yangtze Memory Technologies (YMTC), all continuously improving their technological capabilities and production capacity. Consequently, price competition in the NAND flash memory market has intensified in recent years, even causing losses for Samsung Electronics and SK Hynix.
A source familiar with Samsung explained, "Just last summer, neither Samsung Electronics nor SK Hynix could have predicted this boom, highlighting the difficulty of forecasting semiconductor market conditions and formulating investment plans." The source added, "That's why Samsung's business support team is carefully considering all investments to ensure that investment decisions align with comprehensive market validation and forecasts."
Counterpoint stated that "memory prices are unlikely to decrease in the short term."
With memory shortages worsening—DRAM and NAND flash memory prices nearly tripling during the Lunar New Year holiday—analysts predict the supply crunch will continue at least until the second half of next year.
On the 12th, market research firm Counterpoint Research shared this prediction through an online seminar. Counterpoint pointed out that around the Lunar New Year period, the price of 64GB server DRAM memory modules (RDIMM) DDR5 increased by 150% month-on-month, the price of 12GB LPDDR5X mobile memory increased by 130%, and the price of 8GB SO-DIMM DDR4 memory modules for laptops—despite being a traditional product—also surged by 180%. NAND flash memory prices also saw unprecedented increases of 130% to 150%.
The memory shortage is expected to last at least another year and a half, until the second half of 2026. Even with a combined capital expenditure of 80 trillion to 90 trillion won by Samsung Electronics and SK Hynix, it is said that current demand will not be met.
Counterpoint Research analyst Min-Sung Hwang stated, "DRAM production from Samsung, SK Hynix, Micron, CXMT, and Nanya is expected to grow by 26% this year, while NAND production is projected to increase by 24%. However, these increases are unlikely to have a significant impact until the second half of 2027. The supply shortage issue is not expected to be resolved until the end of the second half of 2027."
Against this backdrop, the key competition among HBM suppliers is expected to shift from market share to profit margins this year. Counterpoint notes that SK Hynix accounted for approximately 60% of HBM shipments and revenue last year, but its share is expected to decline in 2025.
Hwang commented, "Compared to last year, Samsung is poised for significant growth in the HBM4 market this year. SK Hynix faces a more challenging situation as it needs to adapt its existing HBM4 products to meet NVIDIA's demands—its ability to recover quickly will be a key factor to watch."
Counterpoint indicates that memory suppliers are canceling production of custom HBM and application-specific integrated circuits (ASICs) and instead increasing general-purpose memory production to maximize profits. Huang emphasized, "Given the continued strong purchasing power of hyperscale data centers, memory prices are unlikely to see a correction in the second half of the year."
The company also assessed that geopolitical risks from the Middle East conflict are unlikely to have a significant impact on memory prices in the short term. Huang pointed out, "It's unlikely to affect memory prices in the short term, but if the energy crisis continues, rising capital costs and electricity bills (which account for more than half of data center operating costs) could lead to 'chip inflation,' thereby suppressing demand."
This analyst believes that one point worth noting is the rise of China, Huang said. During the dot-com bubble of the late 1990s, South Korean memory manufacturers competed with Taiwanese companies, but now they face a China far more powerful than Taiwan, with massive subsidies and a huge domestic market.
Source: Compiled from chosun
