[The Editors' Verdict] The Semiconductor "Deep Freeze" and the Super Boom to Follow

[Asia Economy Reporter Myung Jin-kyu] Every morning, the news is about semiconductors. The hegemony war between the U.S. and China, fought not with guns but with semiconductor technology and equipment, has become a matter of national interest. The securities industry is divided on how the U.S.-led Chip4 alliance (South Korea, U.S., Japan, Taiwan) will impact our country.

Whenever Jerome Powell, Chairman of the Federal Reserve (Fed), makes hawkish (monetary tightening) remarks, the Philadelphia Semiconductor Index plunges, and the stock prices of major semiconductor companies like Samsung Electronics and SK Hynix fluctuate wildly. With inflation adding to the recession, companies are postponing investments.

After rapidly increasing following COVID-19, PC demand has shifted to a decline. Major IT companies such as Amazon and Netflix are delaying investments in data centers. The inventory of D-RAM, which South Korean semiconductor companies focus on, continues to grow. This is the background behind talks of a "semiconductor deep freeze."

Wall Street, which had been talking about a cold spell for months, has suddenly turned optimistic this month. JP Morgan forecasts that while D-RAM and NAND flash will continue to weaken in the second half of the year, the current inventory can be cleared by the first half of next year. Citigroup has also expressed optimism that semiconductor prices may rebound in the second half.

The source of this optimism lies in DDR5, which began mass production last year. DDR memory, first introduced in 2000, has driven the remarkable growth of the PC and server markets. DDR2 started mass production in 2003, DDR3 in 2007, and the currently used DDR4 began mass production in 2012. Each time the generation number changes, power consumption decreases, and capacity and bandwidth (the amount of data processed at once) more than double. The cycle of DDR memory generation changes has been gradually lengthening.

What is noteworthy is that DDR5 D-RAM is being commercialized after 9 years. In other words, the generation shift that has led the computing market competition over the past decade, from CPU speed competition to processing more data per computation through D-RAM generation change, has begun.

On the 29th (U.S. local time), AMD unveiled the Ryzen 7000 series processors for desktop PCs, supporting DDR5 memory for the first time. Intel also plans to introduce next-generation CPUs supporting DDR5 at "Intel Innovation" on September 27. Especially, the emergence of server CPUs supporting DDR5 has caught the attention of IT companies planning next-generation data centers. Simply switching from DDR4 to DDR5 reduces power consumption, increases the data capacity a single server can handle by up to 4 times, and doubles the amount of data processed at once.

With energy prices such as crude oil and natural gas soaring and green energy production slow, reducing power consumption in data centers can be a bigger investment factor than before. At the core of future industries like ultra-large artificial intelligence (AI) replacing simple human tasks, big data used as a basis for online services, the upcoming metaverse (extended virtual world), and non-fungible token (NFT) markets are data centers and semiconductors. The global semiconductor hegemony war also stems from here.

It goes without saying that generation changes create record-high demand. The semiconductor "deep freeze" can turn into a "super boom" in an instant.

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