Samsung Electronics and SK Hynix, South Korea’s leading memory chipmakers, are ramping up DRAM wafer inputs in the second quarter of this year, effectively ending production cuts. The chipmakers are expected to raise the production utilization rate to 100% in the third and fourth quarters, setting the stage for a full-scale recovery.
DRAM, short for dynamic random access memory, is a memory chip used in computers, smartphones, and servers. Samsung Electronics and SK Hynix account for almost 70% of global DRAM production.
Samsung Electronics has revised its average monthly DRAM wafer input from 590,000 to 600,000 wafers in the second quarter of this year, a 13% increase from the previous quarter, according to market research firm Omnia on April 3.
Samsung is expected to boost its DRAM wafer input to 660,000 wafers in the second half of this year, restoring DRAM production to pre-cut levels. The company has been increasing wafer inputs at the 17th line at the Hwaseong plant and Pyeongtaek production lines, where the latest DRAM process conversion using extreme ultraviolet (EUV) lithography equipment is being carried out.
“Considering that DRAM chips are usually shipped three months after the DRAM wafer input, increasing wafer input at this time is a clear indication that demand is solid in the second half of the year,” said an industry insider familiar with the matter. “If production fully recovers in the second half of the year, it will positively impact earnings by year-end.”
SK Hynix has also been gradually increasing wafer input. Omnia forecasts that SK Hynix will raise its average monthly DRAM wafer input from 390,000 in the first quarter to 410,000 in the second quarter. In the second half of the year, the company is expected to ramp up its DRAM wafer input to 450,000 wafers, raising its utilization rate to pre-cut levels.
Samsung Electronics and SK Hynix cut back on production last year in response to an industry downturn. The average selling prices of DRAM chips fell as demand for memory chips weakened, negatively affecting sales of major chipmakers such as Samsung Electronics, SK Hynix, and Micron. The chipmakers slashed their utilization rates from full capacity to 50% and 60% in the first and second quarters of 2023.
Experts see a memory chip upcycle coming as the global artificial intelligence (AI) boom drives up memory chip demand. DRAM prices are on an upward trajectory, rising for four consecutive months from last October to January.
“Despite the seasonal slowdown in the first quarter of this year, the average selling prices of DRAM and NAND flash are expected to rise due to improved supply and demand, which will significantly enhance profitability for Samsung Electronics and SK Hynix,” said Noh Geun-chang, an analyst at Hyundai Motor Securities.
“Given the ongoing constraints in DRAM supply, the semiconductor upcycle is likely to persist until the end of this year and into early next year,” said Korea Investment & Securities analyst Chae Min-sook.
