The memory chip industry may usher in a new round of supply and demand fluctuations
According to a report by the British "Financial Times" on July 20, the previous continuous surge in the semiconductor sector has stopped, and investors have begun to be wary of a common risk: the highly cyclical memory chip industry may once again fall into overcapacity. Although Samsung Electronics' latest quarterly performance guidance was better than market expectations, the stock price has fallen by 1/3 from its June high; SK Hynix's US stock listing performed well, but its domestic stock price in South Korea plummeted by nearly 40%; Micron's stock price also fell by more than 30%.
According to a report by the British "Financial Times" on July 20, the previous continuous surge in the semiconductor sector has stopped, and investors have begun to be wary of a common risk: the highly cyclical memory chip industry may once again fall into overcapacity. Although Samsung Electronics' latest quarterly performance guidance was better than market expectations, the stock price has fallen by 1/3 from its June high; SK Hynix's US stock listing performed well, but its domestic stock price in South Korea plummeted by nearly 40%; Micron's stock price also fell by more than 30%. The violent fluctuations in stock prices reflect the current high-risk game: on one side, artificial intelligence (AI) data centers have created massive demand for memory chips, and on the other side, major manufacturers are spending huge sums of money to expand production and continue to increase supply. Nowadays, the market value of semiconductor companies ranks among the top in the world. The final direction of this supply and demand game will affect the income of millions of investors. Kwon Seok-joon, a professor at Sungkyunkwan University in Seoul, warned that if AI demand falls short of expectations, the production expansion plans of several major storage giants may push up industry inventories in 2028, causing oversupply. Global chip giants increase investment In recent years, the demand for AI model training and inference has grown rapidly, placing higher demands on server performance. Memory chips have become an important part of AI infrastructure. High-bandwidth memory (HBM), in particular, has become an important area where global chip companies are competing for layout because it can meet the high-speed data transmission requirements in the artificial intelligence computing process. SK Hynix has announced an investment plan worth 1.1 trillion won, that is, by 2033, it will invest 600 trillion won to build four dynamic random access memory (DRAM) factories in Yongin, invest 100 trillion won in the Cheongju flash memory factory, and invest 400 trillion won in southwestern Korea to build a new semiconductor industry cluster. The company's executives have stated many times recently that they plan to double their production capacity in the next five years and triple their production capacity by 2034. Samsung Electronics also announced a large-scale semiconductor investment plan: 2.1 trillion won will be invested in South Korea's local semiconductor business before 2040, but it did not clearly indicate the respective investment amounts in the storage foundry and wafer foundry sectors. US memory chip company Micron Technology has also accelerated its global production capacity layout. The company promised to invest more than US$250 billion in the United States by 2035, building new wafer fabs in Idaho, New York, and Virginia, while also increasing its investment in global production bases such as the Hiroshima DRAM factory in Japan and India. Meanwhile, large tech companies continue to build out their AI infrastructure. Microsoft, Amazon, Google parent company Alphabet and Meta all plan to increase investment in data centers, creating continued demand for high-performance computing chips and storage products. China may change the global chip supply pattern However, compared with other semiconductor fields, the memory chip industry has strong cyclical attributes. The industry has experienced many booms and busts over the past few decades. In the 1990s, there were still about 20 players on this track, and now there are only the above three major suppliers in the world. Although most of the new factories in the future investment plans of the three giants will not be put into production until after 2030, the overall investment in production expansion in the next 15 years will be huge, and the market is worried that a new round of overcapacity cycle is coming. The Financial Times reported that the recent stock price fluctuations of the world's major memory chip companies reflect the market's re-evaluation of the industry's future supply and demand relationship. Some investors have begun to pay attention to whether investment in artificial intelligence infrastructure can continue to be converted into corporate profits, and whether the current production expansion plan may lead to increased supply pressure in the future. However, some analysts pointed out that there are certain differences between this memory chip cycle and the past. Macquarie Seoul analyst Daniel Kim explained: HBM wafer consumption costs continue to rise, and at the same time, DRAM process shrinkage technology continues to become more difficult. Producing AI core HBM chips requires consuming far more silicon wafers than ordinary DRAM. Therefore, with DRAM in short supply, downstream customers have signed multi-year long-term agreements with Samsung, SK Hynix, and Micron to prioritize the supply of production capacity. In Quan Xijun's view, HBM is highly customized and has a lower probability of oversupply, but general DRAM may experience overcapacity in 2029. In the next few years, the development of China's storage industry may become the biggest variable changing the global memory chip supply pattern.
"China is a key variable that determines the direction of the industry cycle. Korean manufacturers have stated that they will adjust their investment pace according to market conditions, but if Chinese companies expand production beyond expectations, it will be difficult for Korean companies to control the total global supply." Kwon Seok-jun said. Morgan Stanley estimates that by 2028, China's new DRAM wafer production capacity will account for 30% of the global increase, second only to South Korea in scale.
"China is a key variable that determines the direction of the industry cycle. Korean manufacturers have stated that they will adjust their investment pace according to market conditions, but if Chinese companies expand production beyond expectations, it will be difficult for Korean companies to control the total global supply." Kwon Seok-jun said. Morgan Stanley estimates that by 2028, China's new DRAM wafer production capacity will account for 30% of the global increase, second only to South Korea in scale.