[The Worst Semiconductor Winter] The Late-Arriving 'Corona Boom' Bill... The Second Half of the Year Looks Even Worse

Increasing Facility Investment During Boom Period... Performance Deterioration Expected to Worsen
Intensifying Technological Hegemony Competition... Rising Burden Due to Raw Material Inflation

[Asia Economy Reporters Han Yeju and Kim Pyeonghwa] Experts diagnose that the background of the semiconductor crisis theory is due to the increased uncertainty caused by simultaneous adverse factors that arrived late after the COVID-19 special demand period. Semiconductor companies, which made large-scale investments during the boom, faced a demand cliff as consumer purchasing power sharply declined due to the economic downturn. Oversupply and a surge in inventory, followed by price drops, caused the semiconductor market to freeze rapidly. Rapid technological catch-up by China, intensified US-China technological hegemony competition, and raw material inflation increasing cost burdens are also cited as factors causing the "semiconductor winter." The market forecasts that the semiconductor recession could be longer and harsher than expected.

According to the semiconductor industry on the 5th, the World Semiconductor Trade Statistics (WSTS), a global market research organization, revised this year's global semiconductor market growth rate down to 13.9% from the initial forecast of 16.3%. This is about half of last year's growth rate of 26.2%.

The memory semiconductor market, where domestic semiconductor companies such as Samsung Electronics and SK Hynix hold a large share, is in an even worse situation. WSTS lowered this year's memory market growth rate from 18.7% to 8.2%. The forecast for next year's memory semiconductor market growth rate was also reduced from 3.4% to 0.6%. The global memory semiconductor market, where products like DRAM and NAND flash hold a major share, has a domestic market share of 59%. In particular, Samsung Electronics and SK Hynix are the world’s first and second largest players in the DRAM market, with a combined market share exceeding 70%.

To make matters worse, memory semiconductor prices are also on a downward trend. Taiwanese market research firm TrendForce predicted that DRAM and NAND flash prices in the third quarter could fall by up to 18% compared to the previous quarter. Consumer DRAM prices are expected to drop by 3-8% in the fourth quarter compared to the third quarter. In the NAND flash market, oversupply and increased inventory may lead to dumping by companies to reduce stock.

This is expected to negatively impact the performance of domestic companies specializing in memory semiconductors. Memory accounts for 74% of Samsung Electronics' semiconductor sales and about 97% for SK Hynix. Inventory is already accumulating due to weakened demand. According to the semi-annual reports of Samsung Electronics and SK Hynix, Samsung Electronics' inventory assets in the first half of the year were 52.0922 trillion won, a 26% increase compared to the end of last year. SK Hynix also saw a 33% increase to 11.8787 trillion won from 8.9166 trillion won at the end of last year.

The industry predicts that the deterioration in performance due to the semiconductor recession will be more severe than expected because major semiconductor manufacturers such as Intel and Samsung increased capital expenditures this year. Demand has entered a downward trend, but major manufacturers had already significantly increased capital investments, expecting the COVID-19 special demand to continue. Samsung Electronics broke ground on an R&D center for new technologies such as foundry and system semiconductors at its Giheung plant in Gyeonggi Province on the 18th of last month, and is also preparing to complete the third plant at its Pyeongtaek site within the year. Samsung Electronics' semiconductor capital investment jumped from 24 trillion won in 2018 to 44 trillion won last year.

Semiconductor exports, which had been a pillar of the Korean economy, have already turned red. Last month, Korea's semiconductor export growth rate turned negative for the first time in 26 months. According to the Ministry of Trade, Industry and Energy, semiconductor exports last month amounted to 10.78 billion dollars, down 7.8% compared to the same month last year. The ministry analyzed that this result was caused by demand contraction and price declines in major markets such as the US, Europe, and China. There are forecasts that this situation may continue in the second half of the year.

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