Samsung Electronics and SK Hynix "adjust strategy": new storage factory production plan ahead.

Facing the surging demand for memory chips driven by artificial intelligence, South Korea's two storage giants Samsung Electronics and SK Hynix are accelerating the process of commissioning new wafer fabs, shifting their strategic focus from cautious inventory control to actively expanding production to seize the industry's "super cycle" dividends. According to the Korean "Chosun Ilbo" report, SK Hynix plans to advance the trial run of its Icheon Phase I wafer fab to February-March next year, starting before the completion date. Samsung Electronics also moved up the production time of its Pyeongtaek P4 fab from the first quarter of next year to the fourth quarter of this year, advancing the production plan by about three months. Both companies will focus on deploying high-value-added products on the new production lines, such as high-performance DRAM and high-bandwidth memory (HBM). The background of this round of accelerated production expansion is the surging demand for server chips brought about by the expansion of global AI data centers. KB Securities data shows that as of February this year, the memory chip supply rate for major customers was only about 60%, further aggravating the shortage compared to the fourth quarter of last year. About 70% of Samsung Electronics' memory shipments are absorbed by AI data center companies. The market generally expects the tight supply situation to continue until 2027. Citigroup predicts that the supply growth rates for DRAM and NAND flash memory are 17.5% and 16.5% respectively this year, while the demand growth rates are as high as 20.1% and 21.4%. New production lines to be commissioned ahead of schedule SK Hynix is constructing the Phase I wafer fab in the Icheon Semiconductor Cluster, aiming for completion in May next year. About half of the external framework construction of the project has been completed, with three of the six clean rooms being built simultaneously. This three-story factory is about six times the size of its Cheongju M15X wafer fab. According to the "Chosun Ilbo" report citing sources, SK Hynix is preparing to start trial production before the scheduled completion time, possibly as early as February-March next year. The company plans to rapidly install equipment in the clean rooms that are completed first, prioritizing the production of high-performance DRAM (such as DDR5) and HBM products that are in high demand in the AI era. Samsung Electronics is constructing the P4 (Fourth Factory) wafer fab in Pyeongtaek, originally scheduled for completion in the first quarter of next year, now planned to be advanced to the fourth quarter of this year, compressing the production schedule by about three months. Samsung Electronics will flexibly allocate between memory and wafer foundry equipment based on market conditions, and P4 is expected to focus on producing high-performance memory that is currently in short supply. It is reported that Samsung Electronics recently formulated a strategy to establish a 10-nanometer sixth-generation (1c) DRAM production line for HBM in the P4 fab, with a monthly capacity expected to reach 100,000 to 120,000 wafers. According to the "Chosun Ilbo," citing a semiconductor industry source, "Korean memory companies are in a very busy state to advance production time." Capacity expansion still lags behind demand growth Omdia data shows that Samsung Electronics' DRAM annual capacity (in wafers) will increase from 7.47 million wafers in 2024 to 8.175 million wafers this year. SK Hynix's capacity will increase from 5.115 million wafers to 6.39 million wafers during the same period. With the early commissioning of new fabs, production is expected to further increase next year. The core DRIVE behind the accelerated production expansion of the two companies is the surging demand for high-performance DRAM in servers caused by the expansion of AI data centers. The concentration of production lines on high-value-added HBM chips has led to a relative decrease in the production of general-purpose DRAM, exacerbating the supply shortage. KB Securities points out that "as of February, the shortage of memory chips has intensified compared to the fourth quarter of last year, with the memory chip supply rate for major customers at only 60%. 70% of Samsung Electronics' memory shipments are absorbed by AI data center companies." Citigroup analysis shows that this year's DRAM supply growth rate is 17.5%, and NAND flash memory supply growth rate is 16.5%. In contrast, the demand growth rates for DRAM and NAND flash memory are expected to be 20.1% and 21.4% respectively, with demand continuing to outpace supply. Major market research firms such as Morningstar and JPMorgan predict that the memory supply shortage will continue until 2027. DS Investment Securities stated, "If the supply growth in 2027 is only 1%, this round of the DRAM cycle will last at least until 2027. The demand for server-oriented DRAM is directly related to competitiveness and difficult to reduce easily. Price increases are expected to continue until the third quarter of 2026." Companies confirm significant increases in capital expenditures At recent earnings briefings, both Samsung Electronics and SK Hynix stated that they will increase their capital expenditures this year to address the memory shortage. Kim Jae-june, Vice President of Samsung Electronics' memory business division, stated, "With the expected continuation of AI-related demand, we plan to significantly increase equipment investment in 2026. However, equipment expansion this year and next year will be limited, and the phenomenon of supply shortages may worsen." This statement highlights the time lag characteristic of semiconductor capacity expansion. Although companies are increasing investment and advancing production time, it still takes time from construction to stable mass production, making it difficult to completely alleviate supply-demand imbalances in the short term. A semiconductor industry source explained the strategic intent of early trial production: "This is to quickly enter the trial production stage, stabilize the mass production system, and send a signal to customers that we can provide a stable supply." This article is reproduced from "Wallstreetcn", by author: Li Jia; GMTEight editor: Huang Xiaodong.