Memory Industry Cuts Production... Samsung and Hynix Face Inevitable Operation Rate Adjustments

[Asia Economy Reporters Sunmi Park, Pyeonghwa Kim] The memory semiconductor industry, which is experiencing severe demand slumps, is showing signs of production cuts and investment reductions. Domestic companies, which occupy more than 70% and 50% of the global DRAM and NAND flash markets respectively, are in an environment where production cuts and investment reductions are inevitable as the next step in response to the sharp drop in demand.

According to the semiconductor industry on the 5th, memory semiconductor companies have begun to drastically reduce supply and investment in response to the sharp decline in demand. Micron, the world's third-largest memory semiconductor (DRAM + NAND flash) company based in the U.S., announced in its earnings conference call that it plans to cut capital expenditures by 50% next year and reduce factory operating rates by 5% at the end of the year and early next year. Japan's Kioxia, which ranks third in the world in NAND flash, also announced a 30% reduction in NAND production starting this month.

Domestic companies, which occupy more than half of the entire memory semiconductor market, have not yet officially started production cuts. A representative from a domestic semiconductor company said, "We are still maintaining 100% operating rates," adding, "We are adjusting inventory by lowering prices and responding by increasing the proportion of high value-added memory semiconductors."

However, the industry views that since companies within the 'Top 5' have started production cuts and investment reductions, if memory semiconductor prices continue to fall, leading Korean companies will inevitably have to join in production cuts and investment reductions. Samsung Electronics and SK Hynix are reducing inventory by lowering prices, but semiconductor inventory assets were already at record highs as of the end of the first half of the year. Previously, when memory semiconductor demand sharply declined in 2019, SK Hynix adjusted production volume through production cuts.

Researcher Geunchang Noh, in charge of semiconductors at Hyundai Motor Securities, said, "The industry has already entered the stage of adjusting factory operating rates and reducing investments," and added, "Especially, since Samsung Electronics, the number one company, maintains DRAM factory operating rates above 100%, it is expected to consider adjusting operating rates by controlling wafer input volume in the future." Do-yeon Choi, a semiconductor research fellow at Shinhan Investment Corp., also diagnosed, "Memory semiconductor companies plan to reduce supply in response to the sharp drop in demand by leveraging their monopoly power," and noted, "The speed of semiconductor order reductions is fast."

Memory semiconductor prices are rapidly falling. Last month, the average fixed transaction prices for general-purpose products were $2.85 for DRAM and $4.30 for NAND, continuing a monthly downward trend. Prices a year ago were $4.10 and $4.81 respectively. Taiwanese market research firm TrendForce forecasts that DRAM and NAND prices will fall by 13-18% and 15-20% respectively in the fourth quarter compared to the previous quarter.

As production cuts in the memory semiconductor industry become inevitable, there is a diagnosis that the global memory semiconductor sales scale will also shrink sharply next year. TrendForce predicted that the DRAM market size next year will be $75.9 billion, down 16% from $90.3 billion this year.

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