Samsung, SK Hynix ramp up DRAM business on rapid AI growth

Samsung, SK Hynix to log operating profit margins of more than 40% in 2024 as Big Tech names plan more AI investment

Samsung Electronics semiconductor manufacturing complex under construction in Pyeongtaek, Gyeonggi Province (Photo by Hyuk Choi)
Samsung Electronics semiconductor manufacturing complex under construction in Pyeongtaek, Gyeonggi Province (Photo by Hyuk Choi)
Jeong-Soo Hwang, Chae-Yeon Kim and Eui-Myung Park 4
Sep 02, 2024 (Gmt+09:00) hjs@hankyung.com
Korean chipmakers

Samsung Electronics Co. and SK Hynix Inc.,the world’s two largest memory chipmakers, are expanding their dynamic random access memory business as the global DRAM market is expected to surpass the foundry sector thanks to rapid growth in artificial intelligence.

Samsung, the global memory chip leader, decided to build a PH3 production line for DRAM and other components at its semiconductor manufacturing complex in Pyeongtaek, Gyeonggi Province, South Korea while suspending the construction of a foundry clean room, industry sources in Seoul on Monday.

The factory is expected to produce DRAM chips for high-bandwidth memory (HBM) chips, which will be equipped in Advanced Micro Devices Inc.’s (AMD) AI accelerators, those sources said. An HBM is made by stacking advanced DRAM chips.

“Samsung is first installing equipment for DRAM production at the P4,” one of the sources said, referring to its fourth semiconductor complex in Pyeongtaek.

MORE INVESTMENTS

The company’s capital expenditures for DRAM, excluding spending on building construction, are expected to grow 9.2% to $9.5 billion in 2024, the largest since 2020, according to Citigroup. The capex is likely to increase further to $12 billion in 2025.

SK Hynix, which had cut output last year, was poised to more than triple spending on DRAM chips to $7.1 billion this year from $2.3 billion in 2023. The investments in the sector will rise further to $10.5 billion next year.

“About 65% of memory chip investments will be spent on DRAM,” said Peter Lee, co-head of Citi’s global tech & communications unit. “Much will be set aside for high-value-added DRAM such as HBM.”

The global memory chip market is growing. The industry, which includes DRAM and NAND flash chips, was forecast to nearly double to $175 billion this year, topping the foundry industry of $120.3 billion dominated by Taiwan Semiconductor Manufacturing Co., according to industry analysis firms Omdia and Techinsights Inc.

The memory chip market is likely to exceed the $200 billion mark for the first time in 2025, when the DRAM market is set to reach $162 billion. 

(Graphics by Dongbeom Yun)
(Graphics by Dongbeom Yun)

Samsung and SK Hynix are set to invest billions of dollars to develop next-generation products such as processing in memory (PIM), which performs central processing unit (CPU) operation in memory, and computer express link (CXL), a unified interface that adds efficiency to accelerators, DRAM and storage devices used with CPUs and graphics processing units (GPUs) in high-performance server systems.

“Memory chips have grown faster than CPUs in the semiconductor industry history,” said Hwang Cheol-Seong, a professor at Seoul National University’s Department of Materials Science and Engineering, Hybrid Materials.

“Memory chips are expected to play various roles including computation to solve the problem of slowing performance due to the increase in data,” said Hwang, who led the Inter-University Semiconductor Research Center of the country’s top college from 2014 to 2015.

RISING CAPACITY

SK Hynix, the world’s No. 2 memory chipmaker, received a tempting offer from an AI accelerator maker earlier this year. The company asked the South Korean tech behemoth to establish a dedicated memory chip production line, saying it would make an advanced payment of more than 500 billion won.

SK Hynix turned down the offer as it is committed to supplying products worth over 1 trillion won to Nvidia Corp., the global No. 1 AI chip maker.

“That was an anecdote of the era of memory-centric computing amid the rapid growth of AI,” said an industry source in Seoul. Memory-centric computing aims to enable computation capability in and near all places where data is generated and stored.

SK Hynix HBM3E (File photo by SK Hynix)
SK Hynix HBM3E (File photo by SK Hynix)

Memory chipmakers are ramping up DRAM production volumes.

The global RAM capacity was forecast to grow to 1.8 million units a month this year and 1.9 million in 2025 from 1.5 million last year, according to industry tracker DRAMeXchange.

Such increases caused worries about oversupply, which memory chipmakers defied.

Bloomberg reported that 13 Big Tech companies in the US and China such as Google and Alibaba Group plan to invest a total of $226.2 billion in AI data centers this year, up 33.7% from 2023. Their investments are expected to grow 13.4% to $256.6 billion in 2025.

Most of the budget is likely to be spent on AI accelerators, maintaining the DRAM market boom for some time, industry sources said.

The prices of HBM, which is predicted to account for 26% of Samsung’s DRAM capacity and 28% of SK Hynix’s DRAM production as of the end of 2025, are five or six times those of double data rate 5 (DDR5) products, the latest general purpose DRAM chips. That will drive up the two South Korean chipmakers’ profitability.

Samsung and SK Hynix are both predicted to enjoy operating profit margins of more than 40% this year, industry analysts said.

Write to Jeong-Soo Hwang, Chae-Yeon Kim and Eui-Myung Park at hjs@hankyung.com
 
Jongwoo Cheon edited this article.

Memory chip demand to stay firm until H1 2025: SK Hynix CEO

Memory chip demand to stay firm until H1 2025: SK Hynix CEO

SK Hynix chip plant in Icheon, Gyeonggi Province, S. Korea (Courtesy of SK Hynix) The memory chip market is expected to remain upbeat for some time after the industry was resurrected by robust demand for high-performing memory chips such as high-bandwidth memory (HBM), said SK Hynix Inc.'s chie

SK Hynix to supply 12-layer HBM3E to Nvidia in Q4; profit soars in Q2

SK Hynix to supply 12-layer HBM3E to Nvidia in Q4; profit soars in Q2

SK Hynix's DRAM plant in Icheon SK Hynix Inc., the world’s second-largest memory chipmaker after Samsung Electronics Co., said on Thursday it has made a significant turnaround in the second quarter with record quarterly sales and its highest operating profit in six years.Analysts expect S

Samsung sets sights on next-generation memory CXL DRAM

Samsung sets sights on next-generation memory CXL DRAM

Samsung Electronics CXL products South Korean tech giant Samsung Electronics Co. is setting its sights on next-generation memory technology, dubbed CXL, to lead the artificial intelligence era.“We plan to mass-produce 256 GB DRAM supporting CXL 2.0 within this year. We expect the CXL mark

SK Hynix to invest $14.6 bn to build HBM plant in S.Korea

SK Hynix to invest $14.6 bn to build HBM plant in S.Korea

A rendering of SK Hynix's M15X fab (Courtesy of Yonhap) SK Hynix Inc. will spend 20 trillion won ($14.6 billion) to build a new memory chip manufacturing plant on a site originally designated to build a NAND flash memory facility in North Chungcheong Province to cement its leadership in the hig

Samsung holds DRAM supremacy with its market share at 7-year high

Samsung holds DRAM supremacy with its market share at 7-year high

Samsung's 128 GB DRAM based on the compute express link (CXL) 2.0 memory Samsung Electronics Co., the world’s largest memory chipmaker, saw its supremacy in the DRAM segment strengthen last year with its market share hitting its highest point in seven years.The Suwon, South Korea-based te

SK Hynix showcases cutting-edge CXL, AiM memory at OCP Summit

SK Hynix showcases cutting-edge CXL, AiM memory at OCP Summit

SK Hynix showcases its cutting-edge memory chips technologies at the OCP Global Summit 2023 SK Hynix Inc., the world’s second-largest memory chipmaker after Samsung Electronics Co., said on Friday it showcased its next-generation memory semiconductor technologies at the OCP Global Summit

Samsung starts building 4th semiconductor plant in Pyeongtaek

Samsung starts building 4th semiconductor plant in Pyeongtaek

Samsung Electronics' Pyeongtaek Campus The world's largest DRAM supplier Samsung Electronics Co. is accelerating its move to expand production capacities at its manufacturing complex in Pyeongtaek, Gyeonggi Province, South Korea.Recently, it placed orders worth 1 trillion won ($788.6 million) o