Memory Semiconductor Outlook Gloomy but... Technological Superiority Keeps Korean D-RAM "Overwhelming for the Time Being"

KB Management Research Institute, Report on Changes in Semiconductor Industry Structure and Competitiveness Analysis
Memory Semiconductor Price Decline, Despite Intensified Competition, Korean Companies' Technology Gap Remains Overwhelming
Concerns Over Samsung Electronics' Chicken Game "Excessive"

[Asia Economy Reporter Park Sun-mi] As the supply-demand imbalance of memory semiconductors deepens and prices plummet, an analysis has emerged that Korean companies' competitive advantage in DRAM will continue. Since Korean companies excel in all aspects such as integration density, manufacturing costs, and equipment supply, it is analyzed that the environment inevitably leads to Samsung Electronics and SK Hynix continuing to dominate the DRAM market share.

On the 5th, KB Management Research Institute stated in its report "Changes in the Semiconductor Industry Structure and Competitiveness Analysis" that regarding the competitiveness of the Korean DRAM industry, "The technological gap and price competitiveness advantage of Korean companies will continue, and it will be difficult for new entrants to enter the high-spec DRAM market," adding, "Korean companies have competitiveness in integration density, manufacturing costs, and equipment supply." The superiority of the DRAM industry is expected to continue for the time being through domestic manufacturers' level of integration technology, securing profitability by reducing manufacturing costs, and accumulating operational capabilities by preempting extreme ultraviolet (EUV) equipment.

Improving chip integration density through preemption of ultra-fine processes is recognized as a competitiveness directly linked to enhancing DRAM performance and profitability. In this regard, Korean companies are pushing for mass production of the 10-nanometer class 5th generation, which strengthens their competitiveness. The United States shows inferiority in integration density compared to domestic companies, and the delayed adoption of EUV technology is analyzed to result in a continued integration density disadvantage compared to domestic companies in future ultra-fine processes.

China is not even within the competitive range, with a technological gap of about five years or more compared to Korea. Moreover, as the ultra-fine process progresses, domestic manufacturers with superior technology and infrastructure inevitably have lower DRAM manufacturing costs per bit than U.S. Micron, enabling them to maintain profitability advantages. KB Management Research Institute diagnosed, "Korean companies have profitability margins due to cost per bit (COST/BIT) advantages," and "On the other hand, the U.S. is inferior in cost competitiveness compared to Korea and has only about half the productivity of Samsung Electronics." It also analyzed that China has very poor price competitiveness due to low yields of only 50-75% and limitations in focusing mainly on low-spec DRAM.

In terms of equipment supply, Korean companies also have competitiveness. Samsung Electronics has secured EUV lithography equipment necessary for advanced fine processes at the world's second-highest level, and SK Hynix plans to increase the number to more than 20 over three years through pre-orders. In contrast, U.S. Micron plans to introduce EUV from 2024, and due to failure in early preemption, there is a possibility of lagging behind in EUV equipment technology maturity. China faces difficulties in securing advanced equipment and software itself due to U.S. semiconductor restrictions.

The increasing demand for high-performance server memory semiconductors also provides relief for Korean companies. The institute explained, "With the accelerated digital transformation through the COVID-19 pandemic, data traffic is explosively increasing, and the number of global data centers is rapidly growing," adding, "There is a clear increasing trend in DRAM capacity installed for server performance improvement, and goals to reduce operating costs and carbon emissions are driving demand for expensive low-power, high-performance semiconductors."

In the past, many companies entering the DRAM market inevitably led to a 'chicken game,' but currently, with the oligopoly of the top three companies (Samsung Electronics, SK Hynix, Micron), the trend is focusing on improving profitability rather than reckless expansion of supply capacity, which is a positive aspect. Although concerns about the recurrence of the chicken game are spreading in the market as Samsung Electronics declared it will not engage in 'artificial production cuts,' unlike other memory semiconductor companies that have expressed intentions to reduce production, the industry expects minimal impact on the leading companies already in an oligopoly state.

Also, Samsung Electronics' continued investment in facilities is not for increasing production but for technological investment and process advancement, and due to the nature of the semiconductor industry, production is expected to decrease during process transitions, which lowers the possibility of a chicken game recurrence. Rather, by widening the competitive gap with latecomers, there is a view that the profits the current leading companies can receive when the DRAM market improves in the future could be significant.

Hwang Min-sung, head of the Tech Team at Samsung Securities, also focused on the inevitability of natural production cuts despite Samsung Electronics' declaration not to engage in artificial cuts, explaining, "Due to the nature of the semiconductor industry, production inevitably decreases naturally during process transitions," and "In Samsung Electronics' case, capacity reduction is unavoidable due to process transitions associated with EUV adoption."

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