Direct Hit from Inflation... Large Corporations' Investment Plans 'Hesitate' (Comprehensive)

SK Hynix Cheongju Plant Expansion Put on Hold
Micron and TSMC in the Same Industry,
Also LG Ensol Fully Reassesses US Battery Plant

Inside view of the semiconductor factory production line at SK Hynix. (Photo by SK Hynix)

[Asia Economy Reporter Moon Chaeseok] SK Hynix has joined Micron Technology in the U.S. and Taiwan's TSMC in slowing down its capital expenditure. The company has put on hold its plan to expand the M17 plant in Cheongju. The reason cited for the delay is economic uncertainty, a phenomenon that is widely observed among other companies, prompting close monitoring of the trend.

According to industry sources on the 19th, SK Hynix held a board meeting on the 29th of last month intending to approve the Cheongju plant expansion plan but ultimately deferred the decision. SK Hynix had planned to invest about 4.3 trillion won in a new semiconductor factory (M17) on approximately 433,000 square meters of land within the Cheongju Technopolis Industrial Complex. The move was aimed at securing cleanroom facilities (dust- and bacteria-free production environments) in preparation for increased demand for memory semiconductors. The original plan was to start construction early next year and complete it by 2025, but the hold decision likely means a delay. SK Hynix stated that the expansion schedule is "not yet finalized."

The cause being economic uncertainty and the timing just before the Q2 earnings announcement have drawn attention to SK's decision. Earlier, SK Group Chairman Chey Tae-won mentioned on the 13th at the Korea Chamber of Commerce and Industry's Jeju Forum, in his capacity as chairman, that "there may be tactical delays in investment due to the economic downturn in the second half." This was a hint given to the media two weeks before the board's hold decision. Bloomberg also reported that SK Hynix is considering reducing its capital expenditure for next year to 16 trillion won, about 25% less than previously planned, in light of declining demand for electronic devices.

The trend of slowing investment due to demand risk is not unique to companies in Korea. Following Samsung Electronics and SK Hynix, Micron, the world's third-largest memory semiconductor company, also announced plans to reduce capital expenditures from the original plan. Starting in September, Micron will cut back on investments in new plants and facilities. In its earnings announcement last month, Micron stated, "We are taking measures to adjust supply over the coming quarters" and "We will reduce investments in new plants and facilities to prevent oversupply."

TSMC, the world's leading foundry (semiconductor contract manufacturing) company, has also slowed its pace. It lowered its capital expenditure plan for this year from $40 billion to $44 billion (approximately 52.7 trillion to 57.9 trillion won) to $40 billion. Given that the investment in the first half was about $16.7 billion (approximately 22 trillion won), it is uncertain whether even this target will be met. The decision was reportedly made considering increased equipment lead times (the time from order to actual delivery) and inventory status.

For these reasons, some in the industry believe Samsung Electronics may also slow its investment pace. The news of SK Hynix's expansion hold came just one week before the Q2 earnings announcements of SK Hynix and Samsung Electronics scheduled for the 27th. As the two companies are expected to discuss their management strategies for the second half during conference calls with institutional investors, there is keen interest in any remarks regarding production and investment adjustments. In this context, SK's investment adjustment news has emerged. Samsung Electronics has refrained from commenting, stating, "Nothing has been finalized."

The decline in prices of memory semiconductors such as DRAM and NAND flash has made it inevitable for major companies to revise their management strategies. Many analyses suggest that SK Hynix's decision to hold off on plant expansion is closely related to this. The global DRAM market has been in decline since the second half of last year, compounded by adverse factors such as the prolonged Russia-Ukraine war, inflation, and a slowdown in China's economy leading to reduced IT demand. The rise in import prices due to the weak Korean won cannot be ignored either.

Major domestic companies are currently reviewing their previously announced bold investment plans. A representative case is LG Energy Solution's decision to fully reconsider its plan to invest 1.7 trillion won in a standalone battery plant in the U.S. An LG Energy Solution official said, "Due to the worsening economic environment and the sharp rise in investment costs, we are carefully reviewing the timing, scale, and details of the investment," but added, "No decisions have been made yet."

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