Power Outage and Even Earthquake... Will the Semiconductor Super Cycle Come?

Power Outage at Taiwan Micron Factory Also Affected by Earthquake
DRAM Price Increase Expected to Continue Next Year

[Asia Economy Reporter Changhwan Lee] A strong earthquake occurred in Taiwan, a major global semiconductor production hub, causing semiconductor prices to continue rising. Following the power outage incident at Micron earlier this month, the earthquake last week has further exacerbated the semiconductor supply shortage, leading to growing expectations that a memory semiconductor super cycle (long-term boom) will arrive next year.

According to the industry on the 14th, a magnitude 6.7 earthquake, the strongest this year, struck the northeastern offshore area of Taiwan on the night of the 10th. The strong quake shook the entire island for nearly a minute, causing some semiconductor factories to halt operations and employees to evacuate. It is reported that production disruptions at some semiconductor plants are inevitable due to the shutdown.

This earthquake is expected to accelerate the price increase of memory semiconductor DRAM. DRAM prices have recently rebounded due to supply shortage concerns and the Micron power outage. According to market research firm DRAMeXchange, as of the 11th, the spot price of DRAM (DDR4 8Gb) was $2.98, rising about 6% this month alone. This is the first increase in DRAM spot prices in about a month and a half since mid-October.

Although DRAM prices had been weak throughout the second half of the year due to inventory accumulation by major buyers such as server companies, they have recently rebounded. As DRAM prices fell, major DRAM manufacturers like Samsung Electronics and SK Hynix reduced capital investments, which increased supply shortage concerns and pushed semiconductor prices higher. It is reported that the DRAM inventory levels of both companies are about two weeks, below normal levels.

With spot prices rising, the possibility of fixed price increases has also grown. Spot prices usually serve as a leading indicator for fixed prices. Large companies such as Samsung Electronics and SK Hynix trade semiconductors at fixed prices, so an increase in fixed prices directly improves their operating profits. Last month, the average fixed price for DDR4 8Gb DRAM was $2.85, the same as in October.

Accordingly, expectations that the semiconductor super cycle will begin next year are gaining strength. Financial investment firms and semiconductor market research companies anticipate a sharp increase in DRAM demand next year.

Seungyeon Seo, a researcher at Heungkuk Securities, predicted, "Global DRAM demand next year will surge about 23% compared to this year, driven by smartphone shipment recovery and server replacement demand following Intel's new central processing unit (CPU) launch." He added, "On the supply side, conservative investment execution is expected, resulting in a supplier-favorable market."

Intensifying technological competition is also cited as a factor driving price increases. Samsung Electronics and SK Hynix plan to introduce extreme ultraviolet (EUV) process technology into DRAM manufacturing for the first time next year. Both companies are expected to adopt EUV processes for the next-generation DRAM, DDR5, which will be actively shipped to the market starting next year. The introduction of EUV equipment, which costs billions of won per unit, is expected to intensify competition in the DRAM market.

This content was produced with the assistance of AI translation services.