Semiconductors Enter 'Supercycle'... Samsung and SK Hynix Prepare

Increase in Exports and Price Rise Due to Growing Non-Face-to-Face Demand
Samsung Electronics and SK Hynix Prepare Response Strategies as Conditions Improve Next Year

[Asia Economy Reporter Changhwan Lee] A supercycle (period of booming growth) signal has brightened in the semiconductor market for the first time in three years. Supply remains limited, but semiconductor exports have surged for two consecutive months due to increased untact (contactless) demand driven by COVID-19, and prices have also risen sharply.

Domestic semiconductor companies such as Samsung Electronics and SK Hynix believe that the supercycle, initially expected next year, has already begun, and they are busy implementing response strategies including new product launch schedules, production expansion, and sales network inspections.

According to the Korea Customs Service on the 21st, domestic semiconductor exports from the beginning of this month to the 20th surged 26.4% compared to the same period last year. Semiconductor exports have shown clear improvement, increasing this month following a 16.4% rise last month. The government explained that exports of both memory and system semiconductors are increasing due to rising IT demand.

The improvement in semiconductor exports is expected to continue through next year. According to KOTRA's '2021 Export Outlook' released on the same day, the semiconductor market is entering a supercycle next year, with demand expected to increase by 19% for DRAM and 34% for NAND flash compared to this year.

KOTRA explained that semiconductor demand will recover and unit prices will rise next year as the untact economy continues to expand. In particular, with the expansion of 5th generation (5G) mobile communications and PC demand, a supercycle is expected to arrive with a significant increase in exports centered on server and industrial semiconductors.

The semiconductor market saw a sharp price surge centered on memory semiconductors three years ago in 2018, greatly improving the performance of Korean companies, but turned weak in 2019 and the first half of 2020. However, with the third wave of COVID-19 and continued untact demand, semiconductor prices are rising again.

According to market research firm DRAMeXchange, the spot price of DRAM rose about 25% from around $2.7 at the end of last month to $3.38 as of the 18th. The DRAM spot price reaching the $3 range is the first time in six months since May. DRAMeXchange expects the DRAM price rebound to continue, potentially rising up to 10% in the first quarter of next year.

Samsung Electronics' semiconductor division and SK Hynix recently undertook major organizational restructuring to prepare for this supercycle. Samsung Electronics promoted Lee Jung-bae and Choi Si-young to presidents of the core semiconductor divisions, Memory and Foundry, respectively, in early this month’s personnel reshuffle, marking a generational change. SK Hynix also expanded its organization with the arrival of Vice Chairman Park Jung-ho. SK Hynix has also expanded its NAND business by acquiring Intel’s NAND division in October.

Samsung Electronics plans to expedite the launch of the next-generation DRAM 'DDR5,' originally scheduled for late next year, to meet customer needs. They are also reviewing production and launch strategies for next-generation V-NAND with 'double stack' technology. SK Hynix, which developed the highest stacked 176-layer NAND flash in the semiconductor industry, has set a strategy to advance product mass production timing to prepare for the supercycle.

An industry insider said, "DRAM inventory, which once piled up to more than 3 to 4 weeks for our companies, has recently normalized to about 2 weeks. At this pace, supply shortages may occur, so companies are internally preparing countermeasures."

The government is also preparing for the semiconductor supercycle by applying tax credit benefits to advanced semiconductor research and development (R&D) investments and expanding investments in policy-type New Deal funds. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, held the 1st Innovation Growth BIG3 Promotion Meeting at the Government Seoul Office on the same day and stated, "We will actively support large-scale investment plans in the system semiconductor industry."

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